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Figure 15-1 A graph shows Real GDP (Q) on the horizontal axis and Price Level (P) on the vertical axis. Two upward-sloping short-run aggregate supply
Figure 15-1 A graph shows Real GDP (Q) on the horizontal axis and Price Level (P) on the vertical axis. Two upward-sloping short-run aggregate supply curves, SRAS sub 1 and SRAS sub 2, are drawn parallel to one another. SRAS sub 2 lies to the left of SRAS sub 1. The graph also shows two downward-sloping aggregate demand curves, AD sub 1 and AD sub 2. AD sub 2 lies to the right of AD sub 1. A vertical long-run aggregate supply curve, LRAS, is placed at Q sub N. There are four intersection points noted on the graph as follows, reading from left to right, top to bottom: ? Point B lies at the intersection of AD sub 1 and SRAS sub 2 ? Point C lies at the intersection of AD, SRAS sub 2, and LRAS ? Point A lies at the intersection of AD sub 1, SRAS sub 1, and LRAS ? Point D lies at the intersection of AD sub 2 and SRAS sub 2. Refer to Figure 15-1. A Keynesian monetary policy to eliminate a recessionary gap can be portrayed as a move between points a. D and A. b. B and C. c
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