The following graph shows the economy in long-run equilibrium at an expected price level of 120 and potential output of $300 billion. Suppose a sudden and severe contraction in the housing market reduces home values, causing consumers to spend less.

Shift the short-run aggregate supply (SRASSRAS) curve or the aggregate demand (ADAD) curve to show the short-run impact of the housing market slump on the graph.

Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

\f240 O SRAS 200 AD O 160 SRAS PRICE LEVEL 120 80 AD 40 0 0 100 200 300 400 500 600 REAL GDP (Billions of dollars)