b) Now suppose that a stock market crash causes aggregate demand to fall. Use your diagram to show what happens to output and the price level in the short-run . What happens to the unemployment rate? C) Use the sticky-warge theory of aggregate supply to explain what will happen to output and the price level in the long run(assuming no change in policy).What role does the expected price level play in this adjustment? Be sure to illustrate your analysis in a graph.
b) Now suppose that a stock market crash causes aggregate demand to fall. Use your diagram to show what happens to output and the price level in the short-run . What happens to the unemployment rate? C) Use the sticky-warge theory of aggregate supply to explain what will happen to output and the price level in the long run(assuming no change in policy).What role does the expected price level play in this adjustment? Be sure to illustrate your analysis in a graph.
Chapter16: Expectations Theory And The Economy
Section: Chapter Questions
Problem 1WNG
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b) Now suppose that a stock market crash causes aggregate
C) Use the sticky-warge theory of
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