FIGURE 15-3
imageShift in Aggregate Demand or Aggregate Supply A decrease in aggregate demand (from AD1 to AD2) is automatically resisted by the Bank of Canada if it adopts a zero-inflation target; the money supply must be increased (moving aggregate demand from AD2 to AD3) to resist the change in prices. The employment effects of a decrease in aggregate supply (from SRAS1 to SRAS2) are accentuated by the Bank of Canada’s attempt to limit price changes.