Suppose there is a negative AD shock and no shock to AS. It is known that as a result, the economy has fallen into a recession, and output has decreased. Then which of the following alone MUST be true?
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JNU SIS 2021 Question 82: AD-AS model
Answer and worked solution
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AD-AS model has come up 59 times in 7 exams since 2004.
What this question tests
This question is on AD-AS equilibrium and shocks, part of AD-AS model in Macroeconomics.
How demand and supply shocks move output and the price level.
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