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Understanding Demand-Pull Inflation: Initial Equilibrium and Aggregate Supply

Explore the concepts of demand-pull inflation, analyze initial Aggregate Demand and Aggregate Supply curves, and understand the equilibrium at different price levels and aggregate outputs in an economy.

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Understanding Demand-Pull Inflation: Initial Equilibrium and Aggregate Supply

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  1. Demand Pull Inflation • Description of initial Aggregate Demand and Aggregate Supply curves

  2. AS The Price Level Initial Equilibrium AD1 P1 0 Q1 Aggregate Output

  3. AS The Price Level  AD → small  P and large  Y AD2 AD1 P2 P1 0 Y1 Y1 Aggregate Output

  4. AS The Price Level  AD → large  P and small  Y AD3 AD2 AD1 P3 P2 P1 0 Y2 Y3 Y1 Aggregate Output

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