Describe the full employment macroeconomic equilibrium in the ASAD models?

Q: real business cycle models (RBC) are preferable to traditional Keynesian macroeconomic models.

A: real business cycle models (RBC) are preferable to traditional Keynesian macroeconomic models. -…

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Q: What is the fundamental source of transition dynamics in our AS/AD frame-work?

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Q: How relevant is the slope an economy's aggregate supply curve for macroeconomic policy?

A: Disclaimer: As per Bartelby guidelines, unless specifically mentioned for multiple questions, only…

Q: Describe the full employment macroeconomic equilibrium in the As-AD model. what would happen on the…

A: We will answer the first three subparts only. Please resubmit the other parts separately in case you…

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A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Explain macro economics

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Q: How is the natural rate of unemployment illustrated in an AD/AS model?

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Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.