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Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. Now assume that the central bank
Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases the money supply by 6%. Assume this monetary contraction was completely expected. Illustrate both short-run and long-run effects on the macroeconomy by using the AD/AS model. a. In which direction will GDP change? b. In which direction will the price level move? c. In which direction will unemployment move
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