2.4.3 Equilibrium levels of real national output

• Equilibrium

  The state where the rate of withdrawals = the rate of injections, equivalent to the point where AD = AS
• Economy becomes more productive or there is an increase in efficiency


  Supply shifts to the right
• Supply shifting to the right

  Lowers the average price level (Pe to P1) and increases national output (Ye to Y1)
• AS shifts inwards


  Price increases and national output decreases
• Firms have less confidence or there is a recession

  AD might shift inwards
• AD shifting inwards


  Price level falls from Pe to P1, and national output falls from Ye to Y1
• AD increases


  Price level and level of national output both increase