Suppose an economy is in long run equilibrium. 2.1 use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). if GDP is below a potential GDP. Be sure to include both short run and long run aggregate supply. 2.2 The central bank raises the money supply by 5 percent. Use your diagram to show that what happen to output and the price level as the economy moves from the initial to the new short run equilibrium (Call it point B). 2.3 Now show the new long-run equilibrium (call it point C). what cause the economy to move from point B to point C?
Suppose an economy is in long run equilibrium. 2.1 use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). if GDP is below a potential GDP. Be sure to include both short run and long run aggregate supply. 2.2 The central bank raises the money supply by 5 percent. Use your diagram to show that what happen to output and the price level as the economy moves from the initial to the new short run equilibrium (Call it point B). 2.3 Now show the new long-run equilibrium (call it point C). what cause the economy to move from point B to point C?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. Suppose an economy is in long run equilibrium.
2.1 use the model of aggregate demand and aggregate supply to illustrate the initial
equilibrium (call it point A). if GDP is below a potential GDP. Be sure to include
both short run and long run aggregate supply.
2.2 The central bank raises the money supply by 5 percent. Use your diagram to show
that what happen to output and the price level as the economy moves from the initial
to the new short run equilibrium (Call it point B).
2.3 Now show the new long-run equilibrium (call it point C). what cause the economy to
move from point B to point C?
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