Assume that the economy is initially in equilibrium at potential GDP. Suppose that there is a decrease
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Assume that the economy is initially in equilibrium at potential GDP. Suppose that there is a decrease in income in Europe that causes a decrease in demand for U.S.-produced goods. Use an AD–AS graph to show the effect of the decline in income in Europe on output and the price level in the United States in the short run and in the long run.
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The decline in income in Europe decreases US net exports which c...View the full answer
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Related Book For 
Money, Banking, and the Financial System
ISBN: 978-0134524061
3rd edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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