In the short run, the decrease in consumption spending associated with the housing market contraction causes the price level to _____ the price level people expected and the quantity of output to ______ the natural level of output. The housing market slump will cause the unemployment rate to ________ the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the decrease in consumption spending associated with the housing market contraction.
During the transition from the short run to the long run, price-level expectations will ________ and the ______ curve will shift to the ________.
Now show the long-run impact of the housing market slump by shifting both the appregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions,