Firms produce and sell more goods when AD rises and fewer goods when AD falls. In the short run a period that lasts at least at year the aggregate supply curve is essentially flat. An increase in aggregate demand causes output to rise. The AD curve shifts to the right, and producers in most markets in the economy experience an increase in demand for their products. They respond by purchasing more inputs and producing more goods and services.
Y rises, while the price level remains approximately constant.
A decrease in aggregate demand causes output to fall. The AD curve shifts to the left, and producers in most markets experience a decline in demand for their products. They respond by purchasing fewer inputs and producing fewer goods and services. Y falls, and the price level remains approximately constant. Changes in marginal cost lead to changes in product prices, which result in shifts in the short-run AS curve.