Explain how an economy with a shortshyterm equilibrium

Question

1. Explain how an economy with a short­term equilibrium below the long­term equilibrium will adjust to bring the two into alignment.

2. Explain how an economy with a short­term equilibrium above the long­term equilibrium will adjust to bring the two into alignment.

3. Explain why an increase in government spending has the long­term effect of increasing the price level.

4. Describe the short­run and long­run effects of a sudden decrease in consumer spending and explain how these effects are created.

5. Describe the short­run and long­run effects of a law limiting the flexibility of wages and explain how these effects are created.

6. Describe the short­run and long­run effects of a reduction in wages and explain how these effects are created.