Suppose continued terrorist activity forces business firms and government to devote additional resources to law enforcement and military force, causing a permanent reduction in business pro- ductivity. Show the impact in the AD - AS mode! on the long-run level of output and the price level. What is likely to happen to consumption and investment as a result?
Suppose continued terrorist activity forces business firms and government to devote additional resources to law enforcement and military force, causing a permanent reduction in business pro- ductivity. Show the impact in the AD - AS mode! on the long-run level of output and the price level. What is likely to happen to consumption and investment as a result?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Suppose continued terrorist activity forces business firms and government to devote additional resources to law
enforcement and military force, causing a permanent reduction in business productivity. Show the impact in the AD -
AS mode! on the long-run level of output and the price level. What is likely to happen to consumption and investment
as a result?
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