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Starting off, we can use the AD/AS model to look at and examine long-run economic growth. In this process, many things affect this growth rate
Starting off, we can use the AD/AS model to look at and examine long-run economic growth. In this process, many things affect this growth rate including unemployment cycles (specifically, cyclical), inflation, and the unemployment rates that tend to happen naturally. In this specific example of the Great Recession, we are looking at a couple of things specifically, the GDP and the price levels. If we want to see productivity growth, we will have to see a rightward shift in the AS curve, representing the GDP. A rightward shift in this curve would show an increase in overall GDP. Changes in this curve would change the equilibrium by taking the curve further up or down on the AD curve. Ultimately, a leftward shift in the AS curve would increase the equilibrium price, while a rightward shift would cause a decrease in the equilibrium price. Productivity, overall, can be a very detrimental factor in the shifts of these curves. All the main economic factors of production- land, labor, capital, and entrepreneurship, can affect the shift in the AS curve, specifically. While you may not see them directly in this diagram, it is important to note that they are playing a big role
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