Starting from Long-Run Equilibrium,draw an Aggregate Demand-Aggregate Supply Graph to Illustrate

question 161

Essay

Starting from long-run equilibrium,draw an aggregate demand-aggregate supply graph to illustrate the difference between a long-run and a short-run equilibrium due to an increase in aggregate demand.Once the economy is in the short-run equilibrium,explain-but it is not necessary to illustrate-how long-run equilibrium will be restored.

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Definitions:

Net Worth

The difference between an individual or household’s assets and liabilities.

Revenue Bond

A type of bond issued by municipalities or government entities, backed by specific revenue sources rather than the issuer's full faith and credit.

Preferred Stock

Shares that give owners limited voting rights, and the right to receive dividends or assets before owners of common stock.

Convertible Securities

Bonds or preferred stock issues that are convertible into a set number of shares of the issuing company’s common stock.