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Illustrate the Short-Run and Long-Run Impact of an Unexpected Monetary

question 9

Essay

Illustrate the short-run and long-run impact of an unexpected monetary contraction using both the AD-AS model and the Phillips curve. Assume the economy starts initially at full employment.


Definitions:

Tax Revenue

The income that a government receives from taxes imposed on individuals and businesses.

Tax

Mandatory financial charge imposed by a government on individuals, corporations, or transactions to fund public expenditures.

Demand Curve

A visual depiction showing how the demand for a product varies with its price, usually illustrated with a line that slopes downwards towards the right.

Buyers

Persons or organizations that acquire products or services in the marketplace.

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