The business cycle
Explore peaks, contractions, troughs and recoveries around long-term trend growth.
All diagrams / Macroeconomics
Macroeconomics diagrams
Use IB macroeconomics diagrams to connect aggregate demand and aggregate supply to inflation, unemployment and economic growth. Compare classical and Keynesian models, trace automatic adjustment and explain how fiscal and monetary policy may affect the economy.
Crowding out of private investment
Compare the intended fiscal expansion with partial or complete crowding out.
AD–AS equilibrium
Find short-run macroeconomic equilibrium in price level and real GDP.
Shift of the aggregate demand curve
Explore changes in consumption, investment, government spending or net exports.
Shift of the short-run aggregate supply curve
Explore changes in input costs, productivity and short-run productive conditions.
Demand-pull inflation
An increase in AD raises real GDP and the price level.
Cost-push inflation
A fall in SRAS raises the price level while reducing real GDP.
Long-run macroeconomic equilibrium
AD and SRAS intersect on LRAS at potential output.
Recessionary gap
Actual real GDP lies below potential output in the classical model.
Inflationary gap
Actual real GDP lies above potential output in the classical model.
Keynesian aggregate supply
Explore the horizontal, upward-sloping and vertical sections of Keynesian AS.
Keynesian recessionary gap
Equilibrium below potential output on the elastic portion of Keynesian AS.
Keynesian inflationary gap
Excess aggregate demand at maximum capacity raises the price level.
Keynesian full-employment equilibrium
Aggregate demand meets Keynesian AS at potential output.
Automatic adjustment: recessionary gap
Falling input costs shift the SRAS curve until output returns to potential.
Automatic adjustment: inflationary gap
Rising input costs shift the SRAS curve until output returns to potential.
Expansionary demand-management policy
Fiscal or monetary expansion shifts the AD curve toward potential output.
Contractionary demand-management policy
Contractionary fiscal or monetary policy shifts the AD curve left to close an inflationary gap.
Structural unemployment: falling labour demand
A labour-demand mismatch creates unemployment at a rigid wage.
Structural unemployment: minimum wage
A wage floor above equilibrium creates surplus labour.
Cyclical unemployment: monetarist/new classical
A fall in AD opens a recessionary gap below potential output.
Cyclical unemployment: Keynesian
Weak aggregate demand leaves output below full employment.
Deflation caused by falling aggregate demand
A leftward shift of the AD curve lowers the price level and real GDP.
Deflation caused by increasing SRAS
A rightward shift of the SRAS curve lowers the price level and raises real GDP.
Short-run Phillips curve
The short-run trade-off between inflation and unemployment.
Short-run and long-run Phillips curves
Expected inflation shifts SRPC while LRPC remains at the natural rate.
Short-run economic growth: increasing AD
Successive increases in aggregate demand raise actual real GDP.
Long-run economic growth: monetarist/new classical
An outward shift of the LRAS curve increases potential output.
Long-run economic growth: Keynesian
The vertical capacity section of Keynesian AS shifts right.
Economic growth using the PPC
Compare actual growth, potential growth and negative growth.
Lorenz curve and Gini coefficient
Relate the distribution of income to perfect equality and the Gini coefficient.
Income redistribution using Lorenz curves
Compare income inequality before and after taxes and transfer payments.
Money-market equilibrium
Determine the equilibrium interest rate from money demand and money supply.
Changes in the supply of money
Compare how decreases and increases in the money supply change the equilibrium interest rate.