(Figure: Determining Long-Run and Short-Run Economic Shifts) Starting at point J, the economy will move to point in the short run if policymakers successfully reduce aggregate demand. LRPC Unemployment Rate (4) nfation Rate (%)

(Figure: Determining Long-Run and Short-Run Economic Shifts) Starting at point J, the economy will move to point in the short run if policymakers successfully reduce aggregate demand. LRPC Unemployment Rate (4) nfation Rate (%)

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 53CTQ: The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both...

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(Figure: Determining Long-Run and Short-Run Economic Shifts) Starting at point J, the economy will move to point
in the short run if policymakers successfully reduce aggregate demand.
LAPC
Unemployment Rate (%)
Inflation Rate (%)

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The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3 per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?
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