Suppose the economy is initially in a long-run full-employment equilibrium. Aggregate demand increases, shifting the AD curve
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Suppose the economy is initially in a long-run full-employment equilibrium. Aggregate demand increases, shifting the AD curve to the right.
a. What will happen in the short run to employment? To real wages?
b. What will happen in the long run?
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a Output will increase and prices will rise Since money wages are constant in the short run r...View the full answer
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