AS-AD Model: Consider the short-run model of the economy and answer the following questions:

A. In the short-run model it is generally assumed that price levels do not change. How then does the economy move to an equilibrium level of GDP? (Explain in words.)

B. Suppose consumer wealth falls because the stock market takes a nosedive. If the economy begins at full employment, how does that affect GDP? Briefly describe the process and the outcome.