Suppose the U.S. economy begins in long-run equilibrium. Concerns about global climate change cause the government to
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Suppose the U.S. economy begins in long-run equilibrium. Concerns about global climate change cause the government to significantly restrict the production of electricity from fossil fuels. Because of this change in policy, foreign investors lose confidence in the economy, and the dollar falls in foreign-exchange markets.
Draw a diagram to show the short-run effect of these events, and explain why these changes occur.
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