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Construct the AD, SRAS, and LRAS curves

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Construct (graph) the AD, SRAS, and LRAS curves for an economy experiencing (a.) full employment, (b) an economic boom, and (c) a recession.

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Solution Preview

See the attached file. Long run equilibrium occurs when Real GDP = Potential, and when the LRAS intersects the SRAS and aggregate demand curves. When an economy is at full employment, we define this as full potential (no additional workers are available to contribute to ...

Solution Summary

Construction of the AD, SRAS, and LRAS curves with graph. Variation of these curves during different points in the business cycle.