Long-Run Self-Adjustment
AP Macroeconomics · Flashcards · Recall
AP MACROECONOMICS · FLASHCARDS
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QUESTION
How do expectations of future prices affect long-run self-adjustment?
QUESTION
What happens to the economy if wages are perfectly flexible?
QUESTION
What role do flexible prices play in long-run self-adjustment?
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ANSWER
They help restore full employment equilibrium. Prices adjust to eliminate output gaps and restore potential GDP.
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