Q. Using aggregate demand, short-run aggregate supply and long-run aggregate supply curves, explain process by which each of following government policies will move economy from one long-run macroeconomic to another. Illustrate with diagrams. In each case, illustrate what are short-run and long-run effects on aggregate price level and aggregate output? There is an increase in taxes on households. There is an increase in quantity of money. There is an increase in government purchases.