AB 204 Course Great Wisdom / tutorialrank.com AB 204 Course Great Wisdom / tutorialrank.com | Page 13

AB 204 Unit 9 Assignment Monetary and Fiscal Policy,
Macroeconomic Fluctuations and Macroeconomic
Equilibrium
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. Refer to the sets of the aggregate demand, short-run aggregate
supply, and long-run aggregate supply curves. Use the graphs to
explain the process and steps by which each of the following
economic scenarios will shift the economy from one long-run
macroeconomic equilibrium to another equilibrium. Under each
scenario, elaborate the short-run and long-run effects of the
shifts in the aggregate demand and aggregate supply curves on
the aggregate price level and aggregate output (real GDP).

Suppose the household wealth de creases due to a decline in the
stock market asset prices (See the set of graphs below and pay
attention to the 3-stage shifts in graphs).

Assume the government lowers taxes, which increases the
household’s disposable income. However, the government
purchases (spending) remains the same. (See the set of graphs
below and shifts in graphs)

2. Suppose the economy of a hypothetical country has reached
its long-run macroeconomic equilibrium when each of the
following aggregate demand shocks occurs. What kind of gap,