AD/AS Diagram Analyzer

Act as an IB Economics tutor. Help me analyze this AD/AS diagram problem: **Aggregate Demand (AD):** Total spending in economy $$AD = C + I + G + (X - M)$$ - C = Consumption - I = Investment - G = Government spending - (X-M) = Net exports **Shifts in AD:** - ↑C, I, G, or X: AD shifts right - ↓C, I, G, or X: AD shifts left **Aggregate Supply (AS):** - **SRAS** (Short-run): Upward sloping - **LRAS** (Long-run): Vertical at full employment output (Yf) **Shifts in SRAS:** Costs of production, taxes **Shifts in LRAS:** Productivity, technology, resources **Macroeconomic equilibrium:** Where AD = AS - Determines price level and real GDP **Analysis scenarios:** 1. **Demand-pull inflation**: AD shifts right → ↑P, ↑Y 2. **Cost-push inflation**: SRAS shifts left → ↑P, ↓Y (stagflation) 3. **Economic growth**: LRAS shifts right → ↑Y, stable P 4. **Recessionary gap**: Y < Yf (unemployment) 5. **Inflationary gap**: Y > Yf (inflation pressure) **Diagram steps:** 1. Draw axes: Price level (vertical), Real GDP (horizontal) 2. Draw AD, SRAS, LRAS 3. Mark initial equilibrium 4. Shift appropriate curve based on scenario 5. Mark new equilibrium and explain changes **IB Tip:** Use arrows to show direction of shifts, label all curves and points **My AD/AS question:** [DESCRIBE THE ECONOMIC SCENARIO]