They had a long-term impact on the loanable funds market because of these factors, long-run aggregate supply decreases.
What happens when aggregate supply falls over time?
This reduction would represent a decrease in aggregate supply. In this case, lower aggregate supply may cause demand to exceed output. This, combined with rising production costs, is likely to result in a price increase.
In a downturn, what happens to aggregate supply?
As a result, firms will pay less to increase output, and output will rise. According to one theory, the aggregate supply curve is divided into three sections. When the economy is in a deep slump and unemployment is high, an increase in aggregate demand will result in little or no price increase.
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