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traditional & new Keynesian theory

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Both traditional & new Keynesian theory indicate that the short run aggregate supply is horizontal.

a) in terms of their short run implications for the price level & real GDP, is there any difference between the two approaches?

Same short run implications

Different short run implications

b)In the terms of their lon run nimplications for the price level and real GDP, is there any differences between the two appraoches?

Same short run implications

Different short run implications

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Solution Summary

The expert examines traditional and new Keynesian theory.

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In the short run, both theories suggest that increasing government expenditures will help to increase employment and ...

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