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Price Levels, P AS Curve D A P* В C PB AD Curve E AD' YB Yn Output, Y Figure 3.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter4: Labor And Financial Markets

Section: Chapter Questions

Problem 2SCQ: In the labor market, what causes a movement along the supply curve? What causes a shift in the...

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Question

Suppose that the negative shock is long-lasting (i.e., the AD curve stays at AD'). Please explain in words how the economy evolves from Point B to the medium-run equilibrium.

Price Levels, P
AS Curve
D
A
P*
В
C
PB
AD Curve
E
AD'
YB
Yn
Output, Y
Figure 3.

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