Economics 312 Macroeconomics Noah Williams Problem Set 3 Solution
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چکیده
Solution: The shock causes a leftward shift in the IS curve. Recall that the SRAS is horizontal and LRAS is vertical. Also, in the long run Y always returns to its original level, and in the short run, P does not change (sticky prices), so I won’t mention these explicitly below. The question doesn’t mention efficiency wages, so we’ll assume that the FE curve is our usual output supply curve, and so is not vertical. However answers with a vertical FE curve are also acceptable.
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