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Draw AD-AS curve and give explanation for full employment.

 

Suppose which there is an "inflation scare," which is, suppose market participants increase their expectations of future inflation.

 

With the help of AD-AS diagrams, describe the effects of an increase in the expected rate of inflation on the equilibrium value of the price level and real GDP if:

 

(1)    The U.S. economy is initially at full employment.

 

(2)    The U.S. economy is initially below full employment.

 

In your explanations, be clear about the interconnections among markets.

 

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M917071

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