2. Draw a graph that shows the economy currently in long-run equilibrium. a. Suppose that household wealth has been falling for several months. Given this, adjust your graph to show both the short-run change in the price level and real GDP. b. Describe how the economy will adjust in the long run. Using the graph you drew in part a, show this adjustment to long-run equilibrium.

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter24: The Aggregate Demand/aggregate Supply Model
Section: Chapter Questions
Problem 9SCQ: A policymaker claims that tax cuts led the economy out of a recession. Can we use the AD/AS diagram...
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2. Draw a graph that shows the economy currently in long-run equilibrium.
a. Suppose that household wealth has been falling for several months. Given this, adjust your graph
to show both the short-run change in the price level and real GDP.
b.
Describe how the economy will adjust in the long run. Using the graph you drew in part a, show
this adjustment to long-run equilibrium.
Transcribed Image Text:2. Draw a graph that shows the economy currently in long-run equilibrium. a. Suppose that household wealth has been falling for several months. Given this, adjust your graph to show both the short-run change in the price level and real GDP. b. Describe how the economy will adjust in the long run. Using the graph you drew in part a, show this adjustment to long-run equilibrium.
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