The graphs illustrate an initial equilibrium for the economy. Suppose that the stock market broadly decreases. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run.

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter23: Aggregate Demand And Aggregate Supply
Section23.3: The Aggregate Demand Curve
Problem 3QQ
Question
The graphs illustrate an initial equilibrium for the economy. Suppose that the stock market broadly
decreases. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate
supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as
the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the
price level and GDP in the short run and in the long run.
Transcribed Image Text:The graphs illustrate an initial equilibrium for the economy. Suppose that the stock market broadly decreases. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and GDP in the short run and in the long run.
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