The four-diagram approach explains how the price level adjusts in the long run so that the shares of GDP sum to 1.

Question

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The four-diagram approach is a method used in macroeconomics to analyze various aspects of an economy, but it does not specifically explain how the price level adjusts to make the shares of GDP sum to 1. The shares of GDP (such as consumption, investment, government spending, and net exports) summing to 1 is a matter of how GDP is accounted for, not a result of price level adjustments.

The Four-Diagram Approach Explains How the Price Level Adjusts in the Long