Question 1
In the graph, the short-run aggregate supply curve shifts from SRAS₁ to SRAS₂. Which event could have caused this shift?
The AP Macroeconomics graphs, with a free graph drill
Five models carry most of the course: AD-AS, the money market, loanable funds, the Phillips curve and the foreign exchange market. For each event, decide which curve shifts and which way, then read what happens on both axes. The drill below draws every graph and checks every answer in code.
AD-AS, event 1 of 9
The economy starts in long-run equilibrium. The government increases its spending on roads and bridges.
| AD-AS | Price level against real GDP |
|---|---|
| Money market | Nominal interest rate against the quantity of money |
| Loanable funds | Real interest rate against the quantity of loanable funds |
| Phillips curve | Inflation rate against the unemployment rate |
The graphs and their axes
- AD-AS: price level (PL) on the vertical axis, real GDP on the horizontal; AD slopes down, SRAS up, LRAS is vertical at full-employment output.
- Money market: nominal interest rate on the vertical axis, quantity of money on the horizontal; money demand slopes down and the money supply is vertical in a system with limited reserves.
- Loanable funds: real interest rate on the vertical axis, quantity of loanable funds on the horizontal; demand slopes down and supply slopes up.
- Phillips curve: inflation rate on the vertical axis, unemployment rate on the horizontal; the short-run curve slopes down and the long-run curve is vertical at the natural rate.
- Foreign exchange: the price of a currency in another currency on the vertical axis, the quantity of the currency on the horizontal.
Shift or move along?
- A change in the variable on an axis is a movement along a curve. Anything else that changes plans shifts the curve.
- A change in aggregate demand moves the economy along the short-run Phillips curve. A supply shock or a change in expected inflation shifts it.
- A higher price level or real GDP shifts money demand right; an open market purchase shifts the money supply right.
Try 2 questions
Question 2
The government introduces an investment tax credit, which lowers the cost of new equipment for firms. What happens in the loanable funds market?
Next step
College Board's AP Macroeconomics course page, with the unit weights
Questions people ask
What graphs do you need to know for AP Macroeconomics?
The production possibilities curve, supply and demand, AD-AS, the money market, the market for reserves, loanable funds, the Phillips curve and the foreign exchange market.
What is on the axes of the AD-AS graph?
The price level on the vertical axis and real GDP (real output) on the horizontal axis.
Does a change in aggregate demand shift the Phillips curve?
No. It moves the economy along the short-run Phillips curve. A supply shock or a change in expected inflation shifts the short-run curve.