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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

How is long-term growth illustrated in an AD/AS model?

To determine

Long Term Growth rate by AD and AS curve is to be determined.

Explanation

In the above diagram, Output( Real GDP) is measured on X-axis while price level is measured on Y-axis.

LRAS(Long-run aggregate supply curve) is considered vertical as there is least possibility of change in output in long-run.

With the technical progress, there is rightward shift in LRAS curve from LRAS0 to LRAS1to LRAS2, there is equilibrium attainment from E0to E1and then to E2.

Price level decreased from P0to P1to P2...

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