Suppose the economy is in a long-run equilibrium. Draw a diagram to illustrate the state of the economy. Be sure to show aggregate demand, short-run aggregate supply, and long-run aggregate supply. Now suppose that a stock market crash causes aggregate demand to fall. Use your diagram to show what happens to output and the price level in the short run. What happens to the unemployment rate? Explain how the economy reaches the long run equilibrium from 5b.
Suppose the economy is in a long-run equilibrium. Draw a diagram to illustrate the state of the economy. Be sure to show aggregate demand, short-run aggregate supply, and long-run aggregate supply. Now suppose that a stock market crash causes aggregate demand to fall. Use your diagram to show what happens to output and the price level in the short run. What happens to the unemployment rate? Explain how the economy reaches the long run equilibrium from 5b.
Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply
Section: Chapter Questions
Problem 19E
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- Suppose the economy is in a long-run equilibrium.
- Draw a diagram to illustrate the state of the economy. Be sure to show aggregate demand, short-run
aggregate supply , and long-run aggregate supply. - Now suppose that a stock market crash causes aggregate demand to fall. Use your diagram to show what happens to output and the
price level in the short run. What happens to theunemployment rate? - Explain how the economy reaches the long run equilibrium from 5b.
- Draw a diagram to illustrate the state of the economy. Be sure to show aggregate demand, short-run
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