The figure given below depicts short-run equilibrium in an aggregate demand-aggregate supply model.The Fed can return the economy to potential output in the long run by:
Definitions:
Empirically Tested
Pertains to a method or statement that has been verified or investigated through observation and experiment.
Independent Variable
In an experiment, the variable that is manipulated or changed by the researcher to observe its effects on the dependent variable.
Manipulates
The action of skillfully handling, controlling, or using something or someone for one's own advantage.
Experimenter Effect
Tendency of the experimenter’s expectations for a study to unintentionally influence the results of the study.
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