Create a realistic scenario that illustrates the aggregate-demand / aggregate-supply model. In your scenario, you should identify changes in specific variables that cause each curve to shift.
Choose ONE of the statements below and discuss the impact on output and prices using the AD-AS model.
“In 2012, the unemployment rate will not fall significantly.”
“The slump in the housing prices, coupled with tighter lending standards, will make the economic recovery slow and painful.”
“Increasing budget deficits will make the economic recovery uncertain and will hamper future economic growth.”