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Unformatted text preview: States economy out of the depression. As the aggregate demand increases the price level falls, influencing people to buy more at lower prices and an increase in the amount of goods and services demanded. This would ultimately result in a government budget deficit where the total government expenditures exceed the total government revenues. By shifting the aggregate demand, the equilibrium level of aggregate output and employment would rise. Keynesian economics flourished and ultimately brought the nation out of the Great Depression. It encouraged full employment and price stability. Unfortunately, prices are not stable for long periods of time and as inflation increases the Keynesian model applies less and less....
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This note was uploaded on 03/10/2011 for the course ECON 101 taught by Professor Duc during the Spring '05 term at Linfield.
- Spring '05