Question
Use both the IS-LM and AS-AD models to graphically illustrate the effect of the relaxation of antitrust laws in the short and long run. Be
Use both the IS-LM and AS-AD models to graphically illustrate the effect of the relaxation of antitrust laws in the short and long run. Be sure to label the axes, curves, use arrows to show shifts in curves, and mark the equilibrium points: "A" for initial equilibrium; "B" for the short- run equilibrium, "C" for the long-run equilibrium. Assume that the SRAS curve is horizontal and that the U.S. economy was initially at full equilibrium output before the relaxation of anti-trust laws. b. Using your graphs from Part (a) determine what would happen to the following variables in the short-run compared to their initial levels. Did the following variables increased, decreased or did they remain unchanged in the short run? No explanation is required. (i) output: (ii) price level: (iii) interest rate: (iv) investment: (v) consumption: (vi) unemployment:
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