Last year, there was a boom in the stock market causing an increase in wealth for...

 

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Last year, there was a boom in the stock market causing an increase in wealth for households, which led to increased consumption. Use IS-LM model and Aggregate Demand and Aggre- gate Supply model to graphically demonstrate the effects of a boom in the stock market on the economy. Label the axes, curves, initial long-run equilibrium, short-run equilibrium, and final long-run equilibrium. 1 a. Explain what happens to price, output, interest rate, unemployment, investment, and consumption in the short-run. b. Explain what happens to price, output, interest rate, unemployment, investment, and consumption as the economy transitions from the short-run to the long-run. Last year, there was a boom in the stock market causing an increase in wealth for households, which led to increased consumption. Use IS-LM model and Aggregate Demand and Aggre- gate Supply model to graphically demonstrate the effects of a boom in the stock market on the economy. Label the axes, curves, initial long-run equilibrium, short-run equilibrium, and final long-run equilibrium. 1 a. Explain what happens to price, output, interest rate, unemployment, investment, and consumption in the short-run. b. Explain what happens to price, output, interest rate, unemployment, investment, and consumption as the economy transitions from the short-run to the long-run.