© 2005 Thomson
Gottheil - Principles of Economics, 4e
Exhibit 3: Aggregate Demand, GDP, and Employment
2. If aggregate demand increases from AD′ to AD″ in panel a, what must occur in panel b?
The aggregate expenditure curve must shift upwards from AE′ to AE″.
The vertical distance between AE′ and AE″ is the resulting inflationary gap.