Question
Draw an initial long-run equilibrium with two curves: an LAS curve and an AD curve. a) Now suppose the following events happen, over several years:
Draw an initial long-run equilibrium with two curves: an LAS curve and an AD curve.
a)
Now suppose the following events happen, over several years: the labour force grows, there is strong investment in new capital stock, and technological progress advances steadily. Draw the new long-run equilibrium, ten years later, and discuss the outcomes.
(b)
In this second scenario, as well as everything in (a) happening, in addition there is a rise in the money supply each year, for several years. Draw the new long-run equilibrium, ten years later, and discuss the outcomes.
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