Suppose an economy experiences a period of high growth and low unemployment. Eventually output returns to its previous level, and but there is a sustained increase in the price level. in 3-5 sentences, using the AS/AD model, describe what type of shock must have occurred and what happened to the economy. Be sure to include which curve(s) must have shifted initially and which direction. Then describe what must have occured to reach the long-run outcome - in other words, which curve(s) adjusted and what happened to output, unemployment, and the price level.
Suppose an economy experiences a period of high growth and low unemployment. Eventually output returns to its previous level, and but there is a sustained increase in the price level. in 3-5 sentences, using the AS/AD model, describe what type of shock must have occurred and what happened to the economy. Be sure to include which curve(s) must have shifted initially and which direction. Then describe what must have occured to reach the long-run outcome - in other words, which curve(s) adjusted and what happened to output, unemployment, and the price level.
Chapter15: Monetary Policy
Section: Chapter Questions
Problem 9QP
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