The document discusses deflationary and inflationary gaps. A deflationary gap occurs when actual output is below potential output, while an inflationary gap is when actual output exceeds potential output. The document also examines how unemployment and inflation relate to aggregate supply curves. It further analyzes how increases in aggregate demand can affect national output levels as the economy moves along the aggregate supply curve from one equilibrium to another.

1. Deflationary and
inflationary gaps

2. Deflationary and inflationary
gaps
The deflationary gap

3. W, J
The deflationary gap
W
J
O
Ye Y

4. W, J
The deflationary gap
Deflationary gap
W
c
d J
O YF
Ye Y

5. W, J, E
The deflationary gap
Y
E
O YF
Ye Y

6. W, J, E
The deflationary gap
Y
E
a
b
Deflationary gap
O YF
Ye Y

7. W, J, E
The deflationary gap
Y
E
a
b
Deflationary gap
W
c
d J
O YF
Ye Y

8. Deflationary and inflationary
gaps
The inflationary gap

9. W, J
The inflationary gap
W
J
O Ye Y

10. W, J
The inflationary gap
W
J
O YF Ye Y

11. W, J
The inflationary gap
Inflationary gap
W
g
J
h
O YF Ye Y

12. W, J, E
The inflationary gap
Y
E
O Ye Y

13. W, J, E
The inflationary gap
Y
E
O Ye Y

14. W, J, E
The inflationary gap
Y
E
e
Inflationary gap f
O YF Ye Y

15. W, J, E
The inflationary gap
Y
E
e
Inflationary gap f
W
g
J
h
O YF Ye Y

16. Deflationary and inflationary
gaps
Unemployment
and inflation

17. Unemployment and inflation
AS 1
Price level
O YF Y

18. Unemployment and inflation
AS AS
2 1
Price level
O YF Y

19. Deflationary and inflationary
gaps
Effects of increases in
aggregate demand on
national output

20. demand
on national output AS
Price level
O YP
National output

21. The effects of increases in aggregate demand
on national output
AS
Price level
AD4
AD3
AD1 AD2
O Y1 Y2 Y3 Y4 YP
National output