n the Keynesian framework, the Aggregate Demand and the Aggregate Supply curves are adopted to show the relationship between output, employment and inflation. So, if the current resources are not totally used, the promoting effective demand done by the government interventions will improve not only the output, but also the employment and this will happen without creating inflation until the output reaches the LRAS curve. In the graph above, it is possible to see that the AD curve at AD1 is not reaching full output and employment expectations. By promoting effective demand the AD curve will shift from position AD1 to position AD2 where the output is at its full production level but price did not increase and remain at P1. If the demand keep increasing, the curve will move from AD2 to position AD3. In this situation, the output will not increase, because the full output was already reached in position AD2, but in AD3 the price will increase to P2 caused by the excessive demand. And so, the phenomenon of inflation has appeared. This type of inflation is caused by an excessive demand and is called demand-pull inflation. This type of inflation does not impact the output in the long run.>