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The figure below is a part of the AD-AS model as a description of the current situation of an economy. P PA=$10 A YA=4000 Y a. Find the short-run equilibrium (the real output and the price level) of this economy v b. We know that the natural level of output is 3500. Add the long-run supply curve onto the grap c. Graphically show how the economy would adjust to the long-run equilibrium, if the government does nothing d. If the government aims to avoid inflation but can endure deflation, what should the government do to adjust the economy to a long-run equilibrium? Graphically show your answer. .

The figure below is a part of the AD-AS model as a description of the current situation of an economy. P PA=$10 A YA=4000 Y a. Find the short-run equilibrium (the real output and the price level) of this economy v b. We know that the natural level of output is 3500. Add the long-run supply curve onto the grap c. Graphically show how the economy would adjust to the long-run equilibrium, if the government does nothing d. If the government aims to avoid inflation but can endure deflation, what should the government do to adjust the economy to a long-run equilibrium? Graphically show your answer. .

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The figure below is a part of the AD-AS model as a description of the current situation of an economy. P PA=$10 A YA=4000 Y a. Find the short-run equilibrium (the real output and the price level) of this economy v b. We know that the natural level of output is 3500. Add the long-run supply curve onto the grap c. Graphically show how the economy would adjust to the long-run equilibrium, if the government does nothing d. If the government aims to avoid inflation but can endure deflation, what should the government do to adjust the economy to a long-run equilibrium? Graphically show your answer. .
Transcribed Image Text:The figure below is a part of the AD-AS model as a description of the current situation of an economy. P PA=$10 A YA=4000 Y a. Find the short-run equilibrium (the real output and the price level) of this economy v b. We know that the natural level of output is 3500. Add the long-run supply curve onto the grap c. Graphically show how the economy would adjust to the long-run equilibrium, if the government does nothing d. If the government aims to avoid inflation but can endure deflation, what should the government do to adjust the economy to a long-run equilibrium? Graphically show your answer. .
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