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Assume that the economy is initially in equilibrium at AD, and AS, (a) The Price level will be and the real domestic output will be (b) If there is demand pull inflation, then in the short run, the new equilibrium is at point and real domestic output at (c) In the long run, the nominal wages will rise so that aggregate supply curve shifts from The new equilibrium will be at point with the price level at _to and real domestic output at _ with the price level at so the increase in the aggregate demand has only moved the economy along its curve.

Assume that the economy is initially in equilibrium at AD, and AS, (a) The Price level will be and the real domestic output will be (b) If there is demand pull inflation, then in the short run, the new equilibrium is at point and real domestic output at (c) In the long run, the nominal wages will rise so that aggregate supply curve shifts from The new equilibrium will be at point with the price level at _to and real domestic output at _ with the price level at so the increase in the aggregate demand has only moved the economy along its curve.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume that the economy is initially in equilibrium at AD, and AS, (a) The Price level will be and the real domestic output will be (b) If there is demand pull inflation, then in the short run, the new equilibrium is at point and real domestic output at (c) In the long run, the nominal wages will rise so that aggregate supply curve shifts from The new equilibrium will be at point with the price level at _to and real domestic output at _ with the price level at so the increase in the aggregate demand has only moved the economy along its curve.
Transcribed Image Text:Assume that the economy is initially in equilibrium at AD, and AS, (a) The Price level will be and the real domestic output will be (b) If there is demand pull inflation, then in the short run, the new equilibrium is at point and real domestic output at (c) In the long run, the nominal wages will rise so that aggregate supply curve shifts from The new equilibrium will be at point with the price level at _to and real domestic output at _ with the price level at so the increase in the aggregate demand has only moved the economy along its curve.
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