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Slide 1
A graph is shown, with Real GDP on the x axis and Price Level on the y axis. There is a curve marked AD0 and an intersecting curve marked SRAS. The intersection of these two curves is labeled E0. A vertical line on the right is marked LRAS.

This graph shows an equilibrium, E0, at a price level of P0 and an output of Y0.

What do you think will happen to the AD curve when there is an increase in consumer confidence or business confidence?

A graph is shown, with Real GDP on the x axis and Price Level on the y axis. There is a curve marked AD0 and an intersecting curve marked SRAS. Another curve to the right is labeled AD1.

An increase in consumer confidence or business confidence can shift AD to the right, from AD0 to AD1.

What do you think this will do to the equilibrium point?  Go to the next slide to find out.

Slide 1 of 3