Inflation Step 3. Worsening Rate, T LRAS financial crisis shifted AD further leftward, Step 2. leading to an while AS shifted down... increase in inflation and a decline in output. AS, AS Step 1. A negative supply shock shifted AS upward and a negative demand 3 shock shifted AD leftward... AD AD, Step 4. leading to a further decline AD, in output and a fall in inflation. Aggregate Output, Y