Why Are the Long-Run Effects of an Increase in Aggregate

question 81

Essay

Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?

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Definitions:

Trade Deficit

A situation in which a country's imports exceed its exports, reflecting a net outflow of domestic currency to foreign markets.

Merchandise Trade Deficit

The economic condition occurring when a country imports more physical goods than it exports, resulting in a negative trade balance.

Japanese Manufacturers

Japanese manufacturers are companies based in Japan known for their efficiency, advanced technology, and emphasis on quality and innovation in sectors like automotive and electronics.

Foreign Markets

Markets outside a company's or country's own borders where goods and services are traded, often requiring adaptation to different cultural, legal, and economic environments.