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Suppose that an economy is initially at the longrun and shortrun equilibrium. In the current year, we observe that the price level decreases but the

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Suppose that an economy is initially at the longrun and shortrun equilibrium. In the current year, we observe that the price level decreases but the full employment output remains unchanged. Consider the following two cases. Case (A! The government can bring the economy to the full employment output by increasing its purchase of consumption goods and services. Case (B1 The government can bring the economy to the full employment output by reducing its purchase of consumption goods and services. (3) Which curve(s) in the LRASSRASAD diagram must have shifted to generate the drop in the price level in the current year and that Case (A) applies, and what is the direction of the shift? Propose a factor that leads to the shift of the curve in the direction you have suggested, state clearly whether the factor increases or decreases. And explain why the increase in the government's purchase of consumption goods and services can bring the economy to the ll- employment output. (b) Which curve(s) in the LRAS-SRASAD diagram must have shifted to generate the drop in the price level in the current year and that Case (B) applies, and what is the direction of the shift? Propose a factor that leads to the shift of the curve in the direction you have suggested, state clearly whether the factor increases or decreases. And explain why the decrease in the government's purchase of consumption goods and services can bring the economy to the ll- employment output

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