Assume That the Long-Run Aggregate Supply Curve Is Vertical at Y

question 15

Essay

Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0. The aggregate demand curve is Y = 2(M/P) and M = 1,500.
a. If the economy is initially in long-run equilibrium, what are the values of P and Y?
b. If M increases to 2,000, what are the new short-run values of P and Y?
c. Once the economy adjusts to long-run equilibrium at M = 2,000, what are P and Y?

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Definitions:

Neurons

Neurons are the basic working units of the brain and nervous system, responsible for receiving, processing, and transmitting information through electrical and chemical signals.

Cell Body

The spherical part of a neuron that contains the nucleus and connects to the dendrites and axon, critical for processing information.

Axon

A long, slender projection of a neuron that conducts electrical impulses away from the neuron's cell body to other neurons, muscles, or glands.

Dendrites

The branched extensions of a neuron that receive signals from other neurons and convey them toward the cell body.