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Figure 14-1 A graph shows Real GDP on the horizontal axis and Price Level (P) on the vertical axis. There are three price levels noted
Figure 14-1 A graph shows Real GDP on the horizontal axis and Price Level (P) on the vertical axis. There are three price levels noted above the origin, in increasing order as follows: P sub 1, P sub 2, and P sub3. Three upward-sloping short-run aggregate supply curves, SRAS sub 1, SRAS sub 2, and SRAS sub 3, are drawn parallel to one another. SRAS sub 2 lies to the right of SRAS sub 1 and SRAS sub 3 lies to the right of SRAS sub 2. The graph also shows three downward-sloping aggregate demand curves, AD sub 1, AD sub 2, and AD sub 3. AD sub 2 lies to the right of AD sub 1 and AD sub 3 lies to the right of AD sub 2. A vertical long-run aggregate supply curve, LRAS, is placed such that it intersects the AD and SRAS curves at various points noted below. There are nine intersection points noted on the graph with coordinates as follows reading from left to right, and top to bottom: ? Point F is at the intersection of AD sub 1 and SRAS sub 1, at price level P sub 3 ? Point H
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