Question: Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the process by which each government policies will move the enconomy from one long-run macroeconomic equilibruium to another. Illustrate with diagrams. In each case, what are the short-run and long-run effects on the aggregate price level and aggregate output?
a. There is an increase in taxes on household
b. There is an increase in the quanity of money
c. There is an increase in government purchases