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given the aggregate supply and aggregrate demand curves in the photo i need to know the level at which increases in real GDP can take place without inflation?


AGGREGATE SUPPLY AGGREGATE DEMAND HOMEWORK 125 120 E-- 115 Price level AD 800 900 1,000 1,100 1,200 1,300 Real GDP (billions
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Answer #1

During the Keynesian range, i.e., the horizontal range of AS, there will be an increase in GDP without inflation. It is because the price level will remain 100 under this portion of AS curve and therefore any rise in aggregate demand will only increase output. Therefore with constant price level, the inflation rate will be zero.

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