The following graph is for Aggregate supply and Effective demand. The pink lines are for 3rd quarter 2013. The blue dots show real GDP. The blue dot to the right is for 3rd quarter 2013. It is obvious that real GDP grew a lot in the 3rd quarter. The blue dot moved far to the right.
The downsloping effective demand lines follow a tight path. The two bottom lines that look yellow and green actually have 5 lines there. There are 3 lines hiding behind them. Strange coincidence.
So I notice that the pink effective demand curve for 3rd quarter 2013 moved up a little. I ask myself why?
Did labor share increase? No... it actually fell a little.
Did the UT index increase? No... it actually fell too.
Then what happened? Well, real GDP is inflated. If real GDP had been less than $15.8 trillion, the pink line would have been in the normal range.
So why is real GDP inflated? Did productivity increase? A little but not much.
It looks as though the real GDP inflation was due to the boost in inventories, which grew $115.7 billion in the third quarter. Inventory grew $56.6 billion in the second and $42.2 billion in the first quarters.
We will see a drag on real GDP either in 4th quarter 2013 or 1st quarter 2014 from declining inventories.
But one thing is for sure, real GDP is getting close to the effective demand limit.