Please take a look at question E and let me know what is the best way to answer it.

Thanks

3. The following questions relate to long-run macroeconomic equilibrium and the stock market boom.

Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increase much more than expected, increasing investor's wealth, and causing a short-term period of unusually increased optimism about the future of the economy.

a. In the short-run, will the AS curve or the AD curve shift, and in which direction will it shift?

AD curve will be affected and it will shift upward.

b. In the short-run, what will happen to the price level and quantity of output (real GDP)?

It will increase.

c. Explain what, if any, impact will there likely be on workers' wages, and the reasons for this impact.

Since the above (question B), will increase so will it should also lead to an increase in the wages, work more, make more.

d. In the long-run, which curve will shift due to the change in wages and price expectations created by the stock market boom? In which direction will it shift?

We should see a shift in the AS curve due to the above mentioned increases, in order to keep up with demand, we should see a supply increase which will also lead to an increase in income/output as well.

e. When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium?