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21Chp22-Econ3310 - Aggregate Supply Equilibrium Analysis...

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Unformatted text preview: Aggregate Supply Equilibrium Analysis Activists vs. non-activists. New-keynesian vs. New-classical The speed of adjustment depends on the degree of price/wage stickiness, and economists disagree. Wages and prices are flexible Less need for government intervention Rapid adjustment Wages are inflexible, particularly downward Need for active government policy Regardless of where output is initially, it returns eventually to the natural rate! Slow adjustment Self-Correcting Mechanism Aggregate Demand ...
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