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Define the concept of equilibrium in the simple expenditure model we developed in class. Now, explain what signal will be detected by analysts that the
Define the concept of equilibrium in the simple expenditure model we developed in class. Now, explain what signal will be detected by analysts that the economy is not in equilibrium? Lastly, assume that we find that actual Y is greater than equilibrium Y, Ye. Explain the reaction by firms to this situation and what you expect to happen to the actual level of Y because of this corporate reaction.
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