Math Solutions

(Steps Shown) Chapter 13 Problem 3.8 Use the graph below to answer the questions that follow. Which of the points A, B, C, or D can represent a long-run

Question: Chapter 13 Problem 3.8

Use the graph below to answer the questions that follow.

  1. Which of the points A, B, C, or D can represent a long-run equilibrium?
  2. Suppose that initially the economy is at point A. If aggregate demand increases from AD 1 to AD 2 , which point represents short-run equilibrium? Which point represents the eventual long-run equilibrium? Briefly explain how the economy adjusts from the short-run equilibrium to the long-run equilibrium.

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