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

question 61

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-tun equilibrium at $M = 2,000$ , what are $P$ and $Y$ ?

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Definitions:

Charged Molecules

Molecules that have an electric charge due to the loss or gain of one or more electrons.

Lipid Molecules

Organic molecules that are fatty acids or derivatives, insoluble in water but soluble in organic solvents, playing key roles in energy storage, structure, and signaling.

Permeability

A measure of the ability of a material to allow fluids or gases to pass through it.

Concentration

Refers to the amount of a substance per defined space or unit volume.