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Long-Run Equilibrium Price Level

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Consider the situation:

A country's long-run equilibrium price level has increased, but the position of its aggregate demand schedule has changed.

You need to answer the following questions:
?What has led to the country's increase in the long-run equilibrium price level and the change in the position of its aggregate demand schedule?
?What specific factors might have accounted for this event?
Explain by giving reasons.

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Solution Summary

Long-Run Equilibrium Price Level is considered.

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In the AD-AS model if the AD curve shifts to the right this will cause a higher equilibrium price level. There are several things that can shift the AD curve. 1) expansionary monetary policy: if the Fed lowers rates then people spend more so consumption and ...

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