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The theory of a flat short-run aggregate-supply curve implies that an increase in money supply should increase output and employment, while the price level should increase at a slow pace.
a. Why does output increase sometimes much slowly than this theory might predict?
b. How would low inflation hinder economic growth?
Saving
The process of setting aside a portion of current income for future use.
Domestic Investment
Financial expenditures within a country on capital goods that will be used for future production, such as buildings, machinery, and equipment.
Goods and Services
Physical products and intangible acts or performances offered in the market for consumption.
Exchange Rate
The measurement of one currency's value against another.
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