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Question 1

The graph below shows the AD-AS diagram for Canada.

Suppose that the economy is initially in long-run equilibrium with the price level of `800`.

Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green).

What is the new GDP in the short-run as a result of this shift?

 

What is the new price level in the short-run as a result of this shift?

 

What is the price level in the new long-run equilibrium as a result of this shift?

 

What is GDP in the new long-run equilibrium as a result of this shift?

 

What causes the economy to move from the short-run equilibrium to the new long-run equilibrium?

 




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