Question: Using aggregate demand, short -run aggregate supply, and long - run aggregate supply curves, explain the process by which each of the following economic events

Using aggregate demand, short -run aggregate supply, and long -

run aggregate supply curves, explain the process by which each of the following economic events will move the economy from one long -run macroeconomic equilibrium to another. Illustrate with diagrams. In each case, what are the short -run and long -

run effects on the aggregate price level and aggregate output?

a. There is a decrease in households’ wealth due to a decline in the stock market.

b.The government lowers taxes, leaving households with more disposable income, with no corresponding reduction in government purchases.

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