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LAS SAS2 130 SAS 120 SASO Price level (GDP deflator, 2000 = 100) 110 А B 100 F AD2 AD ADO O 6 8 10 12 14 16 Real GDP (trillio

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Answer #1

From the given question it can be clearly seen that the economy is not under the influence of government or the bank

It recovers itself

So when there is no policy then in this case the wages drops which means the price paid to labours or the workers decreases

It causes to decrease in the cost and this will lead to increase in the aggregate supply in the short run

So there id rightward shift of the aggregate supply curve from SAS1 to SAS0

The correct answer here is option 3

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