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AS-AD Model: Consider the short-run model of the economy and answer the following questions: a. The key difference between the long-run and short-run model is

AS-AD Model: Consider the short-run model of the economy and answer the following questions:

a. The key difference between the long-run and short-run model is the assumption that prices are flexible. In the short-run prices are assumed to be fixed or, at least, prices are expected not to fall. Why might prices be sticky downward?

b. The short-run aggregate supply curve is thought to be upward sloping, at least above the full employment level of output. Compare that to the long-aggregate supply curve and explain why the two might differ.

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