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Consider the figure to the right. What change in the position of the aggregate demand curve could generate deflation that is, a decrease in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Bank of Canada could generate such a change in the position of the aggregate demand (AD) curve? in aggregate demand. The Bank of A fall in the equilibrium price level could be caused by Canada could generate such a change in the position of the aggregate demand (AD) curve by the quantity of money placed into circulation. 1.) Using the line drawing tool, draw a new AD curve that shows the effects of decreasing the quantity of money in circulation. Label your line "AD2." 2.) Using the point drawing tool, indicate the economy's new long-run equilibrium price and level of real GDP. Label this point "E₂." Carefully follow the instructions above, and draw only the required objects. Price Level LRAS₁ E₁ Real GDP per Year ($ trillions) AD₁

Consider the figure to the right. What change in the position of the aggregate demand curve could generate deflation that is, a decrease in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Bank of Canada could generate such a change in the position of the aggregate demand (AD) curve? in aggregate demand. The Bank of A fall in the equilibrium price level could be caused by Canada could generate such a change in the position of the aggregate demand (AD) curve by the quantity of money placed into circulation. 1.) Using the line drawing tool, draw a new AD curve that shows the effects of decreasing the quantity of money in circulation. Label your line "AD2." 2.) Using the point drawing tool, indicate the economy's new long-run equilibrium price and level of real GDP. Label this point "E₂." Carefully follow the instructions above, and draw only the required objects. Price Level LRAS₁ E₁ Real GDP per Year ($ trillions) AD₁

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
Section: Chapter Questions
Problem 1CQ
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Consider the figure to the right. What change in the position of the aggregate demand curve could generate deflation that is, a decrease in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Bank of Canada could generate such a change in the position of the aggregate demand (AD) curve? A fall in the equilibrium price level could be caused by Canada could generate such a change in the position of the aggregate demand (AD) curve by the quantity of money placed into circulation. in aggregate demand. The Bank of 1.) Using the line drawing tool, draw a new AD curve that shows the effects of decreasing the quantity of money in circulation. Label your line "AD2." 2.) Using the point drawing tool, indicate the economy's new long-run equilibrium price and level of real GDP. Label this point "E₂. Carefully follow the instructions above, and draw only the required objects. Price Level LRAS₁ E₁ Real GDP per Year ($ trillions) AD₁
Transcribed Image Text:Consider the figure to the right. What change in the position of the aggregate demand curve could generate deflation that is, a decrease in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Bank of Canada could generate such a change in the position of the aggregate demand (AD) curve? A fall in the equilibrium price level could be caused by Canada could generate such a change in the position of the aggregate demand (AD) curve by the quantity of money placed into circulation. in aggregate demand. The Bank of 1.) Using the line drawing tool, draw a new AD curve that shows the effects of decreasing the quantity of money in circulation. Label your line "AD2." 2.) Using the point drawing tool, indicate the economy's new long-run equilibrium price and level of real GDP. Label this point "E₂. Carefully follow the instructions above, and draw only the required objects. Price Level LRAS₁ E₁ Real GDP per Year ($ trillions) AD₁
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