Use the following graph to answer the following questions.The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS) have decreased,with no change in short-run aggregate supply (SRAS) .
-In the graph,we see that long-run aggregate supply decreased during the Great Recession.This was due to a decline in housing prices and the subsequent financial crisis.Why did these factors cause long-run aggregate supply to decrease?
Definitions:
Severe Inflation
An extreme rate of inflation, causing a rapid and uncontrollable increase in prices, significantly eroding purchasing power.
Food Shortages
Situations in which the supply of essential food commodities is insufficient to meet the demand, often resulting in hunger and malnutrition.
War Revenue
Refers to funds raised to finance a situation of armed conflict, typically through taxation or the issuance of war bonds.
Union General
A high-ranking officer in the Union army during the American Civil War.
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