A dramatic decrease in tax rates for all Americans over a period of several years leads to a massive, positive demand shock. Before the market has time to adjust, the result of this positive demand shock is an inflationary gap. As the economy responds to gaps caused by different shocks, the focus shifts to the an output gap, which is the difference between actual output and potential output. A sudden movement of the AD curve, in a positive or negative direction, is known as Due to several months of negative performance, consumer confidence and expectations in the stock market fall dramatically, leading to a negative demand shock. The resulting situation will create is a sudden movement of the SRAS curve in either a positive or negative direction. After adjusting to the effects of shocks, the economy experiences an eventual return to equilibrium in the long run. This is due in large part to the ability of the economy to undergo