Assignment 3 consists of one problem question worth 15 marks. Before attempting this assignment you are expected to have read Text chapters 12, 13 and 14. You are encouraged to make use of additional sources. Sources used in your answer should be fully referenced in APA 6th style.

Answer the following question ensuring that you apply economic principles or theory related to understanding the health of the economy and the need for government intervention to inform your analysis and support your decisions. Communicate your ideas with correct grammar, spelling and writing style and support your answer with diagrams and examples as necessary.

Question (15 marks)

Explain why a stable economic equilibrium requires the economy to be operating at an output level at which the aggregate demand curve, the long run aggregate supply curve and the short run aggregate supply curve all intersect.