Assume that the economy is initially in equilibrium at potential GDP. Use an ADAS graph to show
Question:
Assume that the economy is initially in equilibrium at potential GDP. Use an AD–AS graph to show the effect of an increase in government purchases on the price level and the output level in the short run and in the long run. Explain what is happening in your graph.
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The increase in government purchases causes the aggregate dema...View the full answer
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Related Book For 
Money Banking And The Financial System
ISBN: 1801
3rd Edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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