Draw the graph · Macro · Aggregate demand and aggregate supply
Exports surge
Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put. Make each shift clear enough that a reader could see it.
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Aggregate demand shifts right. Short-run aggregate supply stays put. Long-run aggregate supply stays put.
Exports are part of net exports, a component of aggregate demand. More foreign buying means more total spending on this country's output at every price level, so AD shifts right. The economy's costs and capacity have not changed.
The price level rises and real GDP rises, opening an inflationary gap.
Common mistake. Students sometimes shift SRAS right because 'firms produce more for export.' The extra production is a response to extra spending. The shift is in AD.
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Lesson: Aggregate Demand