Suppose that the original long run and short run equilibrium in the economy of Figure 19 3 were at point C where the AD curve crosses the LRAS and SRAS curves Explain why a downward shift in the aggregate demand curve from AD to AD would result in a temporary reduction in output and a permanent red...

Starting from point C in Figure 193 an unexpected decrease in aggregate demand from ...

Suppose that the original long-run and short-run equilibrium in the economy of Figure 19.3 were at point

Question:

Suppose that the original long-run and short-run equilibrium in the economy of Figure 19.3 were at point C where the AD€² curve crosses the LRAS and SRAS€² curves. Explain why a downward shift in the aggregate demand curve from AD€² to AD would result in a temporary reduction in output and a permanent reduction in price.
Figure 19.3