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Consider the following observations in an AD-AS graph. At point 1, the economy is at potential RGDP initially. There is then an increase in government
Consider the following observations in an AD-AS graph. At point 1, the economy is at potential RGDP initially. There is then an increase in government spending which places the economy at point 2. The economy self-corrects and ends up at point 3 in the long run. Now show points 1-3 in a Phillip's curve graph. Which of the following is correct in the Phillip's curve graph? Points 1 and 3 are on the short-run Phillips curve. Point 3 is below point 1. Point 3 lies to the left of point 2. Point 2 lies to the left of point 1
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