Beginning at Long-Run Equilibrium, (I)use the Basic (Static)aggregate Demand and Aggregate

question 39

Essay

Beginning at long-run equilibrium, (i)use the basic (static)aggregate demand and aggregate supply model to illustrate what happens in the short run when the economy suffers a supply shock, and (ii)use the basic (static)aggregate supply and demand model to illustrate what happens in the long run following this supply shock.
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Definitions:

Equation

A mathematical statement that asserts the equality of two expressions, consisting of variables and constants.

Vertex

In geometry, a vertex is the point where two or more curves, edges, or lines meet. In graph theory, it refers to a node or a point where lines or edges join.

Equation

A formal claim in the realm of mathematics that two formulas, consisting of variables and constants, are equal.

Intercepts

Points where a graph intersects the axes; the x-intercept is where the graph crosses the x-axis, and the y-intercept is where it crosses the y-axis.