AB 204 STUDY Education Terms/ab204study.com AB 204 STUDY Education Terms/ab204study.com | Page 11

does point B represent? Is it the short-run or long-run
macroeconomic equilibrium? Explain.
Assume aggregate demand (AD) is held constant, in the long-run,
starting from point B, what will the economy likely experience? Will
it reach the long equilibrium?
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AB 204 Unit 9 Assignment Monetary and Fiscal Policy,
Macroeconomic Fluctuations and Macroeconomic
Equilibrium

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1. 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 decreases 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