Consider a previously closed economy that opens up to international trade. Reference the dynamic aggregate demand-aggregate...

 

    

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Consider a previously closed economy that opens up to international trade. Reference the dynamic aggregate demand-aggregate supply framework below to describe a situation where this would lead to lower inflation in this economy in the long run. New T Inflation LRAS LRAS' SRAS SRAS' AD SRAS Output Opening up to international trade (Click to select) supply curves will shift to the farther to the [(Click to select) potential output and both the short-run aggregate supply and long-run aggregate (Click to select). If monetary policymakers do nothing, the [(Click to select) will shift to close the (Click to select) gap, resulting in a [(Click to select) long-run equilibrium level of inflation. Suppose that a government imposes trade barriers that raise the domestic cost of production and lower potential output. What would you expect to happen to inflation and output in the short run and the long run, assuming monetary policymakers only recognize the fall in potential output with a lag and keep their inflation target unchanged? Consider a previously closed economy that opens up to international trade. Reference the dynamic aggregate demand-aggregate supply framework below to describe a situation where this would lead to lower inflation in this economy in the long run. New T Inflation LRAS LRAS' SRAS SRAS' AD SRAS Output Opening up to international trade (Click to select) supply curves will shift to the farther to the [(Click to select) potential output and both the short-run aggregate supply and long-run aggregate (Click to select). If monetary policymakers do nothing, the [(Click to select) will shift to close the (Click to select) gap, resulting in a [(Click to select) long-run equilibrium level of inflation. Suppose that a government imposes trade barriers that raise the domestic cost of production and lower potential output. What would you expect to happen to inflation and output in the short run and the long run, assuming monetary policymakers only recognize the fall in potential output with a lag and keep their inflation target unchanged?

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