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Unformatted text preview: resources are not being fully employed. When there are unemployed resources, the classical theory predicts that the wages paid to these resources will fall. With the fall in wages, suppliers will be able to supply more goods at lower cost, causing the SAS curve to shift to the right from SAS 1 to SAS 2 . The end result is that the equilibrium price level falls to P 3 , but the economy returns to the natural level of real GDP....
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- Fall '10
- Macroeconomics, classical theory, equilibrium price level