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Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending. According to the model of aggregate demand and aggregate supply, what happens to prices and employment in the short run

1 Answer

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Answer:

prices rise, employment rises.

Step-by-step explanation:

In the starting equilibrium price, there would be more demand that result in fall in the firm inventory. Now in order to maintain the level of the inventory the firm would have to rise the production for this the firm should hire more wokers due to this the employment would rise also the wages are more paid as compared to before so it increase the production cost that results in rise in price

Therefore the above represent the answer

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