Ag_Econ 1042 1st Edition Lecture 11 Outline of Last Lecture I. Aggregate Demanda. The Curve and the factorsII. Aggregate Supplya. Short Runb. Long RunOutline of Current Lecture I. EquilibriumII. Supply ShocksCurrent LectureI. EquilibriumAt equilibrium aggregate demand equals aggregate supply. Short run equilibrium occurs where aggregate demand equals short run aggregate supply. Then long run equilibrium occurs when aggregate demand equals, short run aggregate supply and the long run aggregate supply. In the short run, and increase in aggregate demand causes an increase output and prices. A decrease in aggregate demand in the short run would cause a decrease in output and prices.In the long run, an increase in aggregate demand would cause an increase in prices, but leaving the amount of output the same. While a decrease in aggregate demand would cause a decrease in prices but still leaving output unchanged.II. ShockThere are two types of shocks, supply shock and demand shock. The supply shocks can be either temporary or permanent. In the short run, a positive demand side shock causes prices to increase and output increase, whereas a negative demand shock causes prices and output to decrease. In the long run, a positive demand shock causes price to increase and output to stay the same. A negative demand shock causes a decrease in price and no change in output. As for the supply shocks there are two types for the long run and short run: temporary positive supply shock and temporary negative supply shock. In the short These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.run, a temporary positive supply shock causes output to increase and price to decrease. A negative temporary supply shock causes output to decrease and price to increase in the short run. Then in the long run, a positive or negative supply shock will cause no changes in prices or output. Additionally, there are the positive and negative permanent supply shocks for the long run only. A positive permanent supply shock will cause output to increase and price to decrease, and a negative shock will cause the opposite to