Short-Run Versus Long-Run Effects of a Positive Demand ShockStarting at E1, a positive demand shock shifts AD1 rightward to AD2, and the economy moves to E2 in the short run. This results in an inflationary gap as aggregate output rises from Y1 to Y2, the aggregate price level rises from P1 to P2, and unemployment falls to a low level. In the long run, SRAS1 shifts leftward to SRAS2 as nominal wages rise in response to low unemployment at Y2. Aggregate output falls back to Y1, the aggregate price level rises again to P3, and the economy self-corrects as it returns to long-run macroeconomic equilibrium at E3.