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Exhibit: AD-AS Shifts

-(Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to Y and the price level equal to P₁,if there is an unexpected monetary contraction that shifts aggregate demand from AD₁ to AD₃,then the long-run neutrality of money is represented by the movement from:

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Exhibit: AD-AS Shifts

-(Exhibit: AD-AS Shifts) Starting from long-run equilibrium at A with output equal to Y and the price level equal to P₁,if there is an unexpected monetary contraction that shifts aggregate demand from AD₁ to AD₃,then the long-run neutrality of money is represented by the movement from:

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The long-run neutrality of money means that in the long run, changes in the money supply will not affect real output or the price level. In this case, the unexpected monetary contraction shifts aggregate demand from AD1 to AD3, which initially leads to a decrease in output and a decrease in the price level (movement from A to B). However, in the long run, the economy will adjust to the new monetary policy and output will return to its original level (movement from B to A).

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