short run - behaves simply, equilibrium at intersection of 2 curves
- natural level of output (Yn) doesn't come into play in short run
- equilibrium at instantaneous intersection of AS and AD relations
medium run - shift back to natural level of production
- over time, AS adjusts to go back to natural level of output
- in this case, output too high >> price higher than expected price
- firms will raise their expected price over time, until AS relation shifts to where the intersection is at Yn
- in this case, output too low >> price lower than expected
- firms will lower their expected price until AS relation shifts down to where intersection is at Yn
- important to note that change expected price doesn't shift the AD relation