Key Diagrams - Infrastructure and AD-AS Analysis

In this short video we look at how infrastructure projects might be discussed using an AD-AS diagram.

The Economist calls infrastructure the “economic arteries and veins; roads, ports, railways, airports, power lines, pipes and wires that enable people, goods, commodities, water, energy and information to move about efficiently.”

Successful infrastructure projects can have a triple-powered effect on an economy:

1. The projects themselves create demand leading to an outward shift of aggregate demand
2. Improved transport, telecoms and other services can lower supply costs for firms – shifting out SRAS
3. Infrastructure adds to the productive capacityof an economy - shifting out LRAS