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In the short-run, interest rates fall and GDP rise; however, prices and wages r flexible in the long-run so in this case prices and wages will rise causing price level to rise shifting aggregate demand curve to the right and shifting aggregate supply to the left; therefore, in the long-run effect, interest rates and GDP is unchanged but price level have gone up.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M938219

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