AB 204 Course Great Wisdom / tutorialrank.com AB 204 Course Great Wisdom / tutorialrank.com | Page 14

inflationary or recessionary gap, will the economy face after the
AD shock indicated by the shift in AD curves? What types of
fiscal policy instruments will help move the economy back to
the potential level of output (real GDP)? Give specific
examples.

At the long-run macroeconomic equilibrium, the stock market
boom occurs and this increases the value of stocks households
hold. (See the set of graphs below and shifts in graphs in the
two-steps)

The government increases its purchases (spending) due to
natural disasters. (See the set of graphs below and shifts in
graphs)

Assume the Central Bank reduces the money supply in the
economy which leads to an increase in the interest rates. (See
the set of graphs below and shifts in graphs)
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