Step-by-step explanation:
I am not able to create images or diagrams. However, I can provide a description of the aggregate demand and aggregate supply model in a state of long-run equilibrium.
In the long-run, the economy is in equilibrium when the aggregate demand (AD) equals the long-run aggregate supply (LRAS). The LRAS curve represents the potential output of the economy, assuming all resources are utilized efficiently. It is vertical at the potential output level, which indicates that changes in aggregate demand do not affect output in the long run.
The short-run aggregate supply (SRAS) curve is upward sloping, indicating that output can temporarily increase above or fall below the potential output level in response to changes in aggregate demand or supply shocks. However, in the long-run, the SRAS curve shifts to coincide with the LRAS curve, resulting in the equilibrium level of output being the potential output level.
In a long-run equilibrium, the economy is operating at full employment, and the price level is stable. If there is an increase in aggregate demand, the short-run equilibrium output level will be above the potential output level, leading to upward pressure on prices. This, in turn, will shift the SRAS curve upward, eventually resulting in the long-run equilibrium at the potential output level but with a higher price level. Conversely, if there is a decrease in aggregate demand, the short-run equilibrium output level will be below the potential output level, leading to downward pressure on prices, and the SRAS curve will shift downward, eventually resulting in the long-run equilibrium at the potential output level but with a lower price level.