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(a) Why does the AD curve slope downward? In other words why does lower (higher) inflation is associated with higher (lower) short-run output? (b) If
- (a) Why does the AD curve slope downward? In other words why does lower (higher) inflation is associated with higher (lower) short-run output?
- (b) If the AD curve were more steeply sloped, how would the economy respond differently to supply (inflation) shocks?
- (c) What kind of changes in the economy would lead the curve to be more steeply sloped?
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