Use the following to answer questions . Exhibit: Short-run Aggregate Supply -(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. What happens in the long-run, all other things unchanged? A) The aggregate demand curve will shift back to AD₁. B) The economy will be stuck at an output level below its potential level. C) The economy returns to full-employment equilibrium at point A. D) The economy returns to full-employment equilibrium at point D.

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The Answer of Use the following to answer questions . Exhibit: Short-run Aggregate Supply -(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. What happens in the long-run, all other things unchanged? A) The aggregate demand curve will shift back to AD₁. B) The economy will be stuck at an output level below its potential level. C) The economy returns to full-employment equilibrium at point A. D) The economy returns to full-employment equilibrium at point D.

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