Sally and Ed each own property with a fair market value less than the amount of the outstanding mortgage on the property and also less than the original cost basis.They each were able to convince the mortgage holder to reduce the principal amount on the mortgage.Sally's mortgage is on her personal residence and Ed's mortgage is on rental property he owns.
Definitions:
Long-run Equilibrium
A state in which all inputs and outputs in an economy are fully adjusted and there is no tendency for change.
Aggregate Supply
The total supply of goods and services that firms in an economy are willing to sell at a given overall price level, across all existing price levels.
Long-run Aggregate Supply
The total supply of goods and services that an economy can produce when resources are fully employed at their most efficient levels, without inflation.
Short-run Aggregate Supply
The total supply of goods and services that firms in an economy are willing to produce at a given overall price level in a specific time period.
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