Answered: Draw a set of AD-AS Model(linear)…

Draw a set of AD-AS Model(linear) graphs showing recessionary gap and an inflationary gap. Explain what happens to both graphs in the long-run without government intervention.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Classical Macroeconomics And The Self Regulating Economy

Section: Chapter Questions

Problem 7QP

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Draw a set of AD-AS Model(linear) graphs showing recessionary gap and an inflationary gap. Explain what happens to both graphs in the long-run without government intervention.

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Step 1: Define aggregate demand

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Step 2: Draw the graph and show the effect on the long run incase of recessionary gap and inflationary gap

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