Shifts in the short

Shifts in the short - Shifts in the short-run aggregate...

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Unformatted text preview: Shifts in the short-run aggregate supply curve are much rarer than shifts in the aggregate demand curve. Usually, the short-run aggregate supply curve only shifts in response to the aggregate demand curve. But, when a supply shock occurs, the short- run aggregate supply curve shifts without prompting from the aggregate demand curve. Fortunately, the correction process is exactly the same for a shift in the short-run aggregate supply curve as it is for a shift in the aggregate demand curve. That is, when the short-run aggregate supply curve shifts, a short- run equilibrium exists where the short-run aggregate supply curve intersects the aggregate demand curve. Then the aggregate demand curve shifts along the short-run aggregate supply curve until the aggregate demand curve intersects both the short-run and the long-run aggregate supply curves. Once the economy reaches this new long-run equilibrium, the price level supply curves....
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Shifts in the short - Shifts in the short-run aggregate...

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