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1. Draw the AD-AS model in long-run equilibrium. Using this graph, depict what happens in the...

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Economics

1. Draw the AD-AS model in long-run equilibrium. Using thisgraph, depict what happens in the short run and in the long run ifhousing prices fall across the country.

2. Draw the AD-AS model when the economy is initiallyencountering an inflationary gap and then the government usescontractionary fiscal policy to return to long-run equilibrium.

Answer & Explanation Solved by verified expert
4.2 Ratings (548 Votes)
When houisng prices crash the fall leads to domino effects andcauses widespread unemployment into real estate sector and manycompanies go bust as well as banks go bankrupt This causesliquidity freeze    See Answer
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