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Based on Your Understanding of the AS- AD Model and the IS-

question 12

Essay

Based on your understanding of the AS- AD model and the IS- LM model, graphically illustrate and explain what effect a decrease in the price target will have on the economy. In your graphs, clearly illustrate the short- run and medium- run equilibria.


Definitions:

Desired Level of Growth

The desired level of growth is a target set by a business or organization for the expansion of its operations, sales, or market share over a specific period.

Daily Management Oversight

Continuous supervision of daily operations and activities within an organization to ensure efficiency and goal attainment.

Full Capacity

The maximum level of output that a company can sustain over a period of time without incurring unacceptable delays or costs.

Maximum Level of Sales

The highest amount of sales a company can achieve with its current resources and capacity before needing to expand.

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