Economists disagree about how quickly the economy adjusts to an aggregate demand shock. In the view of some economists, people form expectations based on present realities and change expectations gradually as their experience unfolds. Such expectations are said to be adaptive/ rational/ unexpected/ great/ reasonable The following graph shows the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves for a hypothetical economy that is initially in equilibrium, operating at potential output at point N. PRICE LEVEL 110 106 98 94 40 LRAS SN SRAS SRAS AD₁ AD₂ 44 48 52 QUANTITY OF OUTPUT (Trillions of dollars) 56 ?
Economists disagree about how quickly the economy adjusts to an aggregate demand shock. In the view of some economists, people form expectations based on present realities and change expectations gradually as their experience unfolds. Such expectations are said to be adaptive/ rational/ unexpected/ great/ reasonable The following graph shows the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves for a hypothetical economy that is initially in equilibrium, operating at potential output at point N. PRICE LEVEL 110 106 98 94 40 LRAS SN SRAS SRAS AD₁ AD₂ 44 48 52 QUANTITY OF OUTPUT (Trillions of dollars) 56 ?
Chapter20: Aggregate Demand And Supply
Section: Chapter Questions
Problem 3SQP
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