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D1. LR Agg S P. P, Agg a, ON We can say that O In the long run, P and Q will re O In the long run, Q will increase O at P1, Q1, we see that we had O None of the other options. O at P1, Q1, we see that we wer

D1. LR Agg S P. P, Agg a, ON We can say that O In the long run, P and Q will re O In the long run, Q will increase O at P1, Q1, we see that we had O None of the other options. O at P1, Q1, we see that we wer

Macroeconomics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
Section: Chapter Questions
Problem 1CQ
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5/2046511/quizzes/3587775/take 16. Consider starting from full-employment equilibrium in our Aggregate Demand and Supply model (with flexible wages and worker misperception of price level changes in the short run), at Po, QN on the output market graph below. Then we get a decrease in Aggregate Demand from Agg Do to Agg D1. P LR Agg S SR Agg S. P. P, Agg D Agg D, Q, We can say that O In the long run, P and Q will return to original levels when workers percèive the decrease in P. O In the long run, Q will increase back toward QN as workers take pay cuts that match the deflation rate. O at P1, Q1, we see that we had economic growth. O None of the other options. O at P1, Q1, we see that we were in an inflationary gap.
Transcribed Image Text:5/2046511/quizzes/3587775/take 16. Consider starting from full-employment equilibrium in our Aggregate Demand and Supply model (with flexible wages and worker misperception of price level changes in the short run), at Po, QN on the output market graph below. Then we get a decrease in Aggregate Demand from Agg Do to Agg D1. P LR Agg S SR Agg S. P. P, Agg D Agg D, Q, We can say that O In the long run, P and Q will return to original levels when workers percèive the decrease in P. O In the long run, Q will increase back toward QN as workers take pay cuts that match the deflation rate. O at P1, Q1, we see that we had economic growth. O None of the other options. O at P1, Q1, we see that we were in an inflationary gap.
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