VII. Assume that the economy starts at the natural level of output. Now suppose there is a decline in business confidence, so that investment demand falls for any interest rate. a. In an AD-AS diagram, show what happens to output and the price level in the short run and the medium run. b. What happens to the unemployment rate in the short run and in the medium run?
VII. Assume that the economy starts at the natural level of output. Now suppose there is a decline in business confidence, so that investment demand falls for any interest rate. a. In an AD-AS diagram, show what happens to output and the price level in the short run and the medium run. b. What happens to the unemployment rate in the short run and in the medium run?
Chapter22: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 16P
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