Suppose the economy is initially in equilibrium at an output level of 100 and a price level
Question:
1. Illustrate the initial equilibrium (E1) and the shift of AD.
2. Show what happens to output and prices if the aggregate supply curve is (i) horizontal, (ii) vertical, and (iii) upward sloping.
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1 2 i Horizontal aggregate supply ii Vertical aggregate supply iii Upwardsloping aggregate supply ...View the full answer
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