Government undertake any proactive fiscal or monetary policy

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Suppose the economy is initially in long-run equilibrium and the U.S. stock market has a prolonged decrease in shareholder value. Use the AD–AS model to predict short-run changes to real GDP and the aggregate price level. Using the AD–AS model explain how the economy will adjust in the long run. Should the government undertake any proactive fiscal or monetary policy in this situation? Explain your reasoning

Reference no: EM13889046

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