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Suppose that the economy is currently in short-run macroeconomic equilibrium with actual GDP $400 million above potential GDP. (a) Depict this situation using AD-AS, being sure to label all curves an
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SOLVED: 5) The economy is in short-run macroeconomic equilibrium at point E in the accompanying diagram. Based on the diagram, answer the following questions. Aggregate price level LRAS SRAS1 P. AD Y1
SOLVED: 'a) Is the economy facing an inflationary or a recessionary gap?b) What policies can the government implement that might bring the economy back to long-run macroeconomic equilibrium? Illustrate with a diagram.c)
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