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1based on your understanding of the aggregate supply and

1.Based on your understanding of the aggregate supply and aggregate demand model and the IS-LM model.

a. graphically illustrate and explain what effect an decrease in the money supply will have on the economy. In your graphs, clearly illustrate the short-run and medium run equilibria.

b. When output is less than the natural level of output, explain what adjustments will occur in the labor market and discuss what effect they will have on output and the price level.

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Microeconomics: 1based on your understanding of the aggregate supply and

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