How would a classical economist respond to this situation

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Graph the following scenario taken from the headlines recently. Be sure to focus on what is actually happening. “Central bank Governor Toshihiko Fukui has been predicting the economy's longest expansion in more than 60 years will spur profits and feed into wages and consumer spending, leading to steady price gains. Instead, prices are being driven by increasing oil and raw-materials costs, which is hurting profits and wages and eroding household spending power.” How would a Classical economist respond to this situation? Explain and graph this as well. Now, as a Keynesian economist, what is your response? What policy would you introduce if any? Why do you disagree with the Classical economist’s response? Explain and graph both parts.

Reference no: EM131007791

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