Draw the graph · Macro · Aggregate demand and aggregate supply
A harvest fails
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 stays put. Short-run aggregate supply shifts left. Long-run aggregate supply stays put.
Grain is an input for food producers and many other firms. Higher input costs mean firms supply any given output only at a higher price level, so SRAS shifts left. AD is unchanged. LRAS stays put because the drought is a one-year event, not a change in the economy's resources.
The price level rises and real GDP falls, opening a recessionary gap.
Common mistake. Some students shift LRAS left along with SRAS. LRAS moves only for lasting changes in resources or technology. One bad harvest is a short-run cost shock.
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Lesson: Supply Shocks