Economy adjusts back to long-run equilibrium

Reference no: EM13718715

Draw a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium.

a) Assume that there is a large increase in demand for Malaysian exports. Show the resulting short-run equilinrium on your graph. In this short-run higher or lower than it was before the increase in export? Briefly explain.

Explain how the economy adjusts back to long-run equilibrium. When the economy has adjusted back to long-run equilibrium, how have the values of each on the following changed relative to what they were before the increase in exports:

i) Real GDP

ii) The price level

iii) The unemployment rate

Reference no: EM13718715

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