How would a shock that reduces production costs in the economy (a positive supply shock) affect equilibrium

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How would a shock that reduces production costs in the economy (a positive supply shock) affect equilibrium output and infl ation in both the short run and the long run? Illustrate your answer using the aggregate demand–aggregate supply framework. You should assume that the shock does not affect the potential output of the economy.

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Money Banking And Financial Markets

ISBN: 9780073375908

3rd Edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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