Econ AD/AS: Keynesian and Neoclassical

Keynesian: Consumption Increase

In flat range, rGDP increases and PL don’t change; in vertical range, rGDP increases and PL rise

Neoclassical: Consumption Increase

In short run, rGDP and PL increase; in long run, rGDP returns to potential and PL stay high

Keynesian: Investment Decrease

RGDP decreases while PL don’t change or slightly decrease

Neoclassical: Investment Decrease

In short run, rGDP and Pl decrease; in long run, rGDP returns to potential and PL decrease

Keynesian: Government Spending

rGDP and PL don’t change if under capacity; PL increase if at capacity

Neoclassical: Government Spending

In short run, rGDP and PL increase; in long run, rGDP returns to potential and PL increase causing inflation

Recession with Inflation (Stagflation)

SRAS shifts left; rGDP decreases; PL Increases; caused by a spike in oil prices, war, chain distribution

Recession w/ Stable Prices

AD curve shifts left; rGDP decreases and there is no change in PL; caused by decrease in consumer confidence or investment drops

Recession with Deflation

AD curve shifts left; rGDP decreases and PL declines; typically triggered by significant drops in demand or spending

Economic Boom (Demand Driven)

AD curve shifts right; rGDP and PL increase; due to an increase in government spending, tax cuts, or export increase

Growth with Stable Prices

SRAS curve shifts right; rGDP increases and no change in PL; due to tech innovation or productivity increase

Overheating Economy (near full capacity)

LRAS curve shifts right; sharp increase in rGDP and PL; due to excessive demand in the economy leading to inflation and resource shortages.

Supply Shock Recovery

SRAS curve shifts right; increase in rGDP and decrease in PL; due to improvements in resources and supply normalization post crisis