FIGURE 14-2: How Shifts in Aggregate Demand Lead to Short-Run Fluctuations Here the economy begins in a long-run equilibrium, point A. When aggregate demand increases unexpectedly, the price level rises from P₁ to P₂. Because the price level P₂ is above the expected price level EP₂, output rises temporarily above the natural level, as the economy moves along the short-run aggregate supply curve from point A to point B. In the long run, the expected price level rises to EP₃, causing the short-run aggregate supply curve to shift upward. The economy returns to a new long-run equilibrium, point C, where output is back at its natural level.