Using aggregate demand, short-run (SR) aggregate supply, and
long-run (LR) aggregate supply curves, explain the process by which
each of the following economic events will move the economy from an
original LR (and SR) equilibrium (eq) to a new SR eq, and to a new
LR (and SR) eq. Illustrate with diagrams.
There is a decrease in households’ wealth due to a decline in
the stock market.
The government lowers taxes, leaving households with more
disposable income.