Macroeconomics 11th Edition by Michael Parkin

تمرين 11

Use the following figure to answer Problem. In each question, the economy starts out on the curves labeled AD 0 and SAS 0.

Suppose that people expect deflation (a falling price level), but aggregate demand remains at AD 0.
a. What happens to the short-run and long-run aggregate supply curves(Draw some new curves if you need to.)
b. Describe the initial effects of an expected deflation.
c. Describe what happens as it becomes obvious to everyone that the expected deflation is not going to occur.