AD Shift Right — Keynesian (At Full Capacity)

AD/AS Model · Macro
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LRAS AD₁ AD₂
The economy is already at full capacity, on the vertical section of LRAS. When AD shifts right from AD₁ to AD₂, real GDP cannot rise above Yfe, so the only effect is a rise in the price level from P₁ to P₂. The increase in AD is purely inflationary.