Question: a) Draw the curves for the Aggregate Demand (AD) -Aggregate Supply (AS) model, labelling the axis and distinguishing the short and the long run.

a) Draw the curves for the Aggregate Demand (AD) -Aggregate Supply (AS)

a) Draw the curves for the Aggregate Demand (AD) -Aggregate Supply (AS) model, labelling the axis and distinguishing the short and the long run. (6 marks) b) Provide two channels linking the AD and the economy's level of prices. (5 marks) c) Provide two examples of changes that would shift the AD. (4 marks) d) Provide two examples of changes that would shift the aggregate supply in the long run and describe the new equilibrium in that economy. (5 marks) e) Imagine that the government increases taxes. Describe the adjustment in the short and long run.

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A The Aggregate Demand AD Aggregate Supply AS model is a macroeconomic model that analyzes the interaction between aggregate demand and supply in an economy It shows the relationship between price lev... View full answer

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