Question
The economy is in long-run macroeconomic equilibrium when the point of short-run macroeconomic equilibrium is on the long-run aggregate supply curve. Using a graph, depict
The economy is in long-run macroeconomic equilibrium when the point of short-run macroeconomic equilibrium is on the long-run aggregate supply curve. Using a graph, depict and explain the short-run versus long-run effects of:
I. A contractionary monetary policy resulting in demand shock on the long-run macroeconomic equilibrium. Use one contractionary monetary policy to illustrate your analysis, explain the nature of the policy, and clearly depict the direction of the shift and changes in the equilibrium point, where necessary.
II. An expansionary fiscal policy resulting in demand shock on the long-run macroeconomic equilibrium. Use one expansionary monetary policy to illustrate your analysis, explain the nature of the policy, and clearly depict the direction of the shift and changes in the equilibrium point, where necessary
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