1. Problems 23-1 The chapter suggests that the economy, like the human body, has "natural restorative powers." Illustrate the short-run effect of a rise in aggregate demand. Aggregate Demand Aggregate Supply Price Level Aa Topic 8 Assignment Chapter 23 Quantity of Output Indicate the short-run effect of a rise in aggregate demand on each of the variables in the table. Variable Short-run Effect Output Increases Income Increases Increases Employment Now consider what happens to the economy over time if the government does not use stabilization policy. Adjust the previous graph to show the long-run outcome if the government does nothing in response to the rise in aggregate demande True or False: The long-run adjustment generally occurs in a matter of years. O True False