Assume there are short-run and long-run Macroeconomic Equilibriums in the economy.
5) Assume there are short-run and long-run Macroeconomic Equilibriums in the economy.
Refer to the AS and AD curves above to answer the following questions.
a) What is the initial point of the long-run macroeconomic equilibrium? What are the equilibrium values? What does the appearance of the long-run aggregate-supply (LRAS) curve indicate? How does it differ from AS?
b) What are the factors that can shift short-run aggregate supply curve from AS1 to AS2? What does Point A represent in the graph? What does point B represent? Is it the short-run or long-run macroeconomic equilibrium? Explain.
c) Assume aggregate demand (AD) is held constant, in the long-run, starting from point B, what will the economy likely experience? Will it reach the long equilibrium?
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