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Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the Federal Reserve to conduct a contractionary monetary policy.Briefly explain the condition of the economy and what the Federal Reserve is attempting to do.
Price-Elasticity
A measure of how responsive the quantity demanded of a good is to a change in its price, indicating how shifts in price can affect supply and demand.
Quantity Supplied
The amount of a good or service that producers are willing and able to sell at a specific price.
Coefficient
A predetermined or specific number that is positioned in front of and serves to multiply the variable in a mathematical expression.
Supply Curve
A graphical representation showing the relationship between the price of a good or service and the quantity supplied.
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