Should I use 'inflation rate' instead of 'price level' when using an AD/AS diagram?Watch this thread
Using price level implies that an AD shift to the left causes deflation, which isn't necessarily true, unless the economy is in a deep recession. An AD decrease results in disinflation, but not a reduction in the price level, so why do most AD/AS diagrams still use price level on the vertical axis instead of the inflation rate?
Ultimately, a leftward AD shift causes a decrease in the price level, whether that causes deflation or disinflation doesn't affect what should be on the y-axis. It only infers disinflation if you actively label the origin as zero on every graph which most don't do and you're not expected to. Without labelling the origin the a leftward AD shift can plausibly result in deflation. Either way it's not important, just put price level.