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1. Suppose a boom in stock market prices helps make people feel wealthier. Using the model...

1. Suppose a boom in stock market prices helps make people feel wealthier. Using the model of aggregate demand and aggregate supply, identify and illustrate the curves that are affected, and which direction these curves would shift. In your own words, explain what happens to price level and real GDP and equilibrium? (Hint: Graph your own AD/AS model to answer part of the question)

Aggregate demand and aggregate supply macroeconomics

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SRAS1 SRAS LRAS E3 P2 E2 P1 E1 AD2 Inflationary Gap AD1 Q* Q1 Output A boom in the stock market will shift the aggregate demaAn increase in the values of the stock market will shift the aggregate demand curve to the right and the new equilibrium will be at a higher price that is price P1 and higher output that is at Q1. this will also cause an inflationary pressure in the market.. The real GDP will increase in the market as the output has increased to Q1.

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