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Suppose the economy is currently in short run macroeconomic equilibrium, with actual GDP smaller than potential GDP. (a)Depict this situation using AD-AS, being sure to
Suppose the economy is currently in short run macroeconomic equilibrium, with actual GDP smaller than potential GDP.
- (a)Depict this situation using AD-AS, being sure to label all curves and axes. 5 points.
- (b)Give an example of an automatic stabilizer, and explain how it could close the gap this economy has. 5 points.
- (c)What open market operation could the Federal Reserve carry out, to close this gap? Show graphically the effect it would have. 5 points.
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Global Business Today
Authors: Charles Hill
9th Edition
1259299201, 9781259299209
