10-10. Assume that the economy is in long-run equilibrium
| 10-10. Assume that the economy is in long-run equilibrium | ||||||||||
| with complete information and that input | ||||||||||
| prices adjust rapidly to changes in the prices of | ||||||||||
| goods and services. If there is a rise in the price | ||||||||||
| level induced by an increase in aggregate demand, | ||||||||||
| what happens to real GDP? (See page 219.) | ||||||||||
| When Ad rises GDp and price rise above long run levels. The rise in prices will be factored in by workers who ask for higher wages in long run. This will reduce AS and it shifts upwards | ||||||||||
| this reduce GDP to old long run levels, while price rises. | ||||||||||
| so real GDp in long run will remain unchanged though it rises in short run. | ||||||||||
"96% of our customers have reported a 90% and above score. You might want to place an order with us."
