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:
Security
A financial asset. Commonly a stock or a bond. An asset pledged to guarantee the repayment of a loan.
Stock
Equity securities representing ownership interest in a company; holders may enjoy dividends and voting rights.
Partial Ownership
Holding a fraction of the equity shares or interest in an entity, providing the holder with a proportionate share of the profits and losses.
Future Cash Flows
Estimated future financial earnings or outlays, often used to assess the value of an investment or project.
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