Summary implications SRAS equation:Y=Y+a(P-P) Suppose a positive AD shock moves output above its LRAS SRAS natural rate SRAS and P above the level people had expected. B= Over time, 只 Po=P= AD pe rises, SRAS shifts up, AD and output returns to its natural rate. Y, Return r=Y=Y CHAPTER 13 Aggregate Supply slide 8CHAPTER 13 Aggregate Supply slide 8 Summary & implications Suppose a positive AD shock moves output above its natural rate and P above the level people had expected. Y P LRAS SRAS1 equation: ( )e SRAS Y Y P P = + −  1 1 e P P= SRAS2 AD1 AD2 2 e P = P2 3 3 e P P= Over time, P e rises, SRAS shifts up, and output returns to its natural rate. Y Y 1 = Y 2 Y3 = 1 Return