Use an aggregate demand and supply diagram to illustrate and explain how each of the following will affect the equilibrium price level and the real GDP. Describe and analyze the new situation...

Use an aggregate demand and supply diagram to illustrate and explain how each of the following will affect the equilibrium price level and the real GDP. Describe and analyze the new situation (inflationary gap, recessionary gap, stagflation). How should the situation be rectified in order to return to full employment?

• Workers expect high future inflation and negotiate higher prices now

• Technological improvement increase productivity