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Post your findings on the differences between short-run and long-run aggregate demand and between short-run and...

  1. Post your findings on the differences between short-run and long-run aggregate demand and between short-run and long-run aggregate supply.
  2. Post your explanatory notes on the comparison and contrast of aggregate demand and aggregate supply in terms of creating short-run and long-run equilibrium
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Answer #1

Short and long run aggregate demand are downward sloping. Short run aggregate supply is downward sloping which shows positive relationship between price and quantity supplied while long run aggregate supply is vertical which means that economy is producing at full potential level.

Short run equilibrium occurs when short run aggregate demand = short run aggregate supply while long run equilibrium occurs when demand curve = long run supply curve. In the below diagram, economy is in short as well long run equilibrium which means even in long run producers are able to maintain their production level at full employment level.

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