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Figure 2 (Interactive Graph). The Real Aggregate Supply (RAS) Curve.
This version of the Keynesian Cross works exactly like the original version for changes in aggregate expenditure. But it also allows for positive and negative supply shocks which show up as shifts in real aggregate supply due to changes in resource prices, productivity, etc.
Supply Shocks
Suppose there is a positive supply shock, for example, an increase in the labor supply. A larger labor supply means the economy can produce more output, so the level of potential GDP (Yp) shifts to the right. As a result, an increase in Ep doesn’t cause higher prices since the increased Yp provides room for the economy to grow. Thus, increased Ep leads to increased Y. Of course, if Ep increases enough, the economy would pass Yp and the increased spending would cause inflation, but no additional real GDP.