Consequence of policy action

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If every time real GDP exceeds potential GDP, contractionary policy is used and whenever real GDP is less than potential GDP, expansionary policy is ised. GDP equal potential GDP and then aggregate demand increase. As a consequence of this policy action taken, what would the results be...

Not sure if expansionary policy will decrease unemployment, or it would lower the price level from what it would otherwise be.

Reference no: EM1368936

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