b ) Empirical studies indicate that the long-run trend in real GDP of the USA has an upward trend . How is this possible given business cycles and macroeconomic fluctuations ? What factors explain the upward trend in spite of the cycles ?
5 ) Assume there are short-run and long-run Macroeconomic Equilibriums in the economy .
Refer to the AS and AD curves above to answer the following questions .
What is the initial point of the long-run macroeconomic equilibrium ? What are the equilibrium values ? What does the appearance of the long-run aggregate-supply ( LRAS ) curve indicate ? How does it differ from AS ?
What are the factors that can shift short-run aggregate supply curve from AS1 to AS2 ? What does Point A represent in the graph ? What does point B represent ? Is it the short-run or longrun macroeconomic equilibrium ? Explain .
Assume aggregate demand ( AD ) is held constant , in the longrun , starting from point B , what will the economy likely experience ? Will it reach the long equilibrium ?
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