In the economy of Scottopia, policy makers want to lower the unemployment rate and raise real GDP

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In the economy of Scottopia, policy makers want to lower the unemployment rate and raise real GDP by using monetary policy. Using the accompanying diagram, show why this policy will ultimately result in a higher aggregate price level but no change in real GDP.

Aggregate price level LRAS SRAS1 E1 P1 AD1 Y1 Real GDP

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Macroeconomics

ISBN: 978-1319120054

3rd Canadian edition

Authors: Paul Krugman, Robin Wells, Iris Au, Jack Parkinson

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