20.5 Two Cause of Economic Fluctuations

20.5 a. The Effects of a Shift in Aggregate Demand

An increase in any of the components of aggregate demand shifts the AD curve to the right. When the AD curve shifts to the right it increases the level of production and the average price level. When an economy gets close to potential output, the price will increase more than the output as the AD rises. When price increase dominates an economy, this means that the economy is near its potential output [19].

^{Shifts in Aggregate Demand [13]}

20.5 b. The Effects of a Shift in Aggregate Supply

^{Causes and Effects of Shifts in Aggregate Supply [20]}