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Suppose companies become very optimistic about future business conditions, then invest their funds on a large scale to buy new capital equipment.
a. Use the aggregate demand-supply diagram to show the short-term impact of this optimism on the economy. Mark new price and output levels. Explain in words why the aggregate output supply amount has changed.
b. Now, use the diagram from part (a) to show the new long-term economic balance. (For now, assume that the long-run aggregate supply curve does not change). Explain in words why the total demand for aggregate output changes between the short run and the long run. c. How does the boom in investment affect the long-run aggregate supply curve? Explain
Mark, Donna, and their children, along with another family, traditionally attended Easter brunch at a large downtown hotel. This year, as in the past, Donna called and made a reservation about three weeks prior to Easter. Because half the party co..
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