Solved: Economy to eliminate imbalances in actual-potential output, Macroeconomics

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Economy to eliminate imbalances in actual-potential output

Question:

The ability for the economy to eliminate any imbalances between actual and potential output is sometimes called self-correction. Using an aggregate supply and aggregate demand diagram, show why this self-correcting process involves only temporary periods of inflation or deflation.

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Macroeconomics: Economy to eliminate imbalances in actual-potential output

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