a) If the economy is initially at the WS-PS equilibrium, what happens when there is a sudden increase in the aggregate demand in the economy. b) Use the WS-PS model to graphically derive a set of Philips curves and explain the economic intuition behind the diagram. Provide an explanation of how a situation of deflation could occur. What are you assuming about the real interest rate in the deflationary scenario?

a) If the economy is initially at the WS-PS equilibrium, what happens when there is a sudden increase in the aggregate demand in the economy. b) Use the WS-PS model to graphically derive a set of Philips curves and explain the economic intuition behind the diagram. Provide an explanation of how a situation of deflation could occur. What are you assuming about the real interest rate in the deflationary scenario?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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