What causes the economy to move from its short run equilibrium to its long run equilibrium?
|
Show
What causes the economy to move from its short run equilibrium to its long run equilibrium quizlet?What causes the economy to move from its short-run equilibrium to its long-run equilibrium? The government increases taxes to curb aggregate demand. Nominal wages, prices, and perceptions adjust upward to this new price level.
What causes the economy to move from short run equilibrium to long run?The aggregate supply moves from short-run to long-run when enough time passes such that no factors are fixed. That state of equilibrium is then compared to the new short-run and long-run equilibrium state if there is a change that disturbs equilibrium.
How does the economy shift back to long run equilibrium?The idea behind this assumption is that an economy will self-correct; shocks matter in the short run, but not the long run. At its core, the self-correction mechanism is about price adjustment. When a shock occurs, prices will adjust and bring the economy back to long-run equilibrium.
What is the difference between short run equilibrium and long run equilibrium?What are short-run and long-run equilibrium? Short-run equilibrium is when the aggregate amount of output is the same as the aggregate amount of demand. Long-run equilibrium is when prices adjust to changes in the market and the economy functions at its full potential.
|
