AD-AS Model – AP Macroeconomics

1. An increase in AD causes (short run):

Higher PL and higher GDP Lower PL and higher GDP Higher PL and lower GDP Lower PL and lower GDP

2. The LRAS curve is vertical because:

Prices are sticky In the long run, output depends on resources, not price level Government controls output Wages are flexible downward only

3. A recessionary gap means:

Real GDP > potential GDP Real GDP < potential GDP Price level is at zero Unemployment is zero