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Home/Business & Economics/Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium?

Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium?

When stock prices rise, the quantity supplied and aggregate demand curves change, leading to higher actual money stock at every market price. Interest rates are lowering, encouraging people to accumulate more real assets. Both curves are activated, causing the amount of equilibrium spending and income to grow. As a result, the overall supply curve will move towards the left, while the consumer spending curve shifts towards the opposite.

The expense rates, as well as the GDP, rise once the cost of stock proliferates, given that the real financial value of the public grows, leading to a conforming rise in spending by the customers.

Pay for workers grows when stock prices rise, boosting the demand for greater wages. As a result, it will have an impact on manufacturing costs, exerting more upward pressure on pricing and causing a conceptual spiral.

The shifting of the demand curve to the right occurs as consumer spending rises, necessitating the acquisition of more services and commodities. Higher salaries and prices, on the other hand, cause the supply curve to shift to the left. It is attributable to the fact that it raises manufacturing costs, which may impact the number of items produced.

It has to contrast slightly when compared to the previous when it returns to new long-run macroeconomics. Price levels, labor pay, and output levels will all fall precipitously.

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Academic.Tips. (2022) 'Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium'. 27 November.

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Academic.Tips. (2022, November 27). Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium? https://academic.tips/question/assume-that-a-hypothetical-economy-is-at-long-run-macroeconomic-equilibrium-with-full-employment-and-stable-prices-suddenly-the-stock-market-prices-increased-much-more-than-expected-increasing-inve/

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Academic.Tips. 2022. "Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium?" November 27, 2022. https://academic.tips/question/assume-that-a-hypothetical-economy-is-at-long-run-macroeconomic-equilibrium-with-full-employment-and-stable-prices-suddenly-the-stock-market-prices-increased-much-more-than-expected-increasing-inve/.

1. Academic.Tips. "Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium?" November 27, 2022. https://academic.tips/question/assume-that-a-hypothetical-economy-is-at-long-run-macroeconomic-equilibrium-with-full-employment-and-stable-prices-suddenly-the-stock-market-prices-increased-much-more-than-expected-increasing-inve/.


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Academic.Tips. "Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium?" November 27, 2022. https://academic.tips/question/assume-that-a-hypothetical-economy-is-at-long-run-macroeconomic-equilibrium-with-full-employment-and-stable-prices-suddenly-the-stock-market-prices-increased-much-more-than-expected-increasing-inve/.

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"Assume that a hypothetical economy is at long-run macroeconomic equilibrium, with full employment and stable prices. Suddenly the stock market prices increased much more than expected, increasing investors’ wealth and causing a short-term period of unusually increased optimism about the future of the economy. In the short run, will the AS curve or the AD curve shift, and in which direction will it shift? In the short run, what will happen to the price level and quantity of output (real GDP)? Explain what, if any, impact will there likely be on workers’ wages and the reasons for this impact. 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? When the economy returns to its long-term output level, how will the new long-run macroeconomic equilibrium differ from the original equilibrium?" Academic.Tips, 27 Nov. 2022, academic.tips/question/assume-that-a-hypothetical-economy-is-at-long-run-macroeconomic-equilibrium-with-full-employment-and-stable-prices-suddenly-the-stock-market-prices-increased-much-more-than-expected-increasing-inve/.

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