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Unformatted text preview: Aggregate Supply Equilibrium Analysis Fluctuations in technology, i.e. shifts of LRAS! .
Real supply shocks drive short-run ﬂuctuations in the natural
rate of output Y n
Policy implication: no need for government intervention! We don’t observe Y = Y n at all times, so what causes
Answer: Real business cycle theory (Edward Prescott) New-classicals: Prices and wages are ﬂexible, economy is
always on LRAS and SRAS = LRAS. The natural rate of output is determined by factor
accumulation (labor and capital) and the stance of
technology, i.e. long-run economic growth:
Little or no role for monetary policy and ﬁscal stabilization. Shifts in Long-Run Aggregate Supply (LRAS) Aggregate Demand ...
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This note was uploaded on 02/14/2012 for the course ECON 3310 taught by Professor Dix during the Fall '08 term at York University.
- Fall '08