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Potential GDP for the economy in the picture is $10 trillion dollars.
a. What are the price level and real GDP in the short run equilibrium?
b. Does this country have an unemployment problem or an inflation problem?
c. How will the economy self-correct (move to its long run path)??Assume there are no interventions from the policy makers.
d. What monetary policy action would you advise the central bank to take to fix the problem in (b) and what do you predict will be the effect of that action?
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