Draw a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium.
a) Assume that there is a large increase in demand for Malaysian exports. Show the resulting short-run equilinrium on your graph. In this short-run higher or lower than it was before the increase in export? Briefly explain.
Explain how the economy adjusts back to long-run equilibrium. When the economy has adjusted back to long-run equilibrium, how have the values of each on the following changed relative to what they were before the increase in exports:
i) Real GDP
ii) The price level
iii) The unemployment rate