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P44. Policy and equilibrium: an aggregate demand analysis, p.688.

Aggregate demand and supply are like usual. If level of prices fall, M supply rises, economy output increases. So D is downwardsloping in the SR. Rationalist (neoclassical) consider S in SR vertical. Gradualist think money illusion occurs and economy expands if M supply is rised. Mark up pricing makes supply very elastic. Pigue effect - demand falls, idle money increases demand and cures the unemployment.

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