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In the short run, prices and real GDP can rise due to increased aggregate demand, often sparked by factors such as government spending, consumer confidence, or lower interest rates. When demand for goods and services outpaces supply, businesses may raise prices, leading to inflation. Additionally, firms may ramp up production to meet the higher demand, resulting in an increase in real GDP. However, this scenario may also lead to potential overheating of the economy if sustained over time.

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1w ago

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What is an economy that experiences decreasing real GDP and increasing prices suffering from?

An economy that experiences decreasing real GDP and increasing prices suffering from stagflation.


How would you determine real GDP if you only knew the GDP?

Real GDP is calculated as prices in the "base year" times quantities in the current year. You need to know about base year.


Where can one find the best home prices?

The obvious place to check home prices would be to consult with a real estate agent who would have the up to date information on price value. There are also online apps that also help find values.


How does inflation impact the relationship between bond prices and inflation?

Inflation can cause bond prices to decrease because the fixed interest payments on bonds become less valuable in real terms. This means that when inflation rises, the purchasing power of the fixed interest payments decreases, leading to a decrease in bond prices.


What will happen to the equilibrim price level and real GDP if aggregate demand and aggregate supply both increase?

If aggregate demand increases at every price level than the demand curve shifts to the right. In the short-run the new equilibrium forms from an increase in willingness to spend, thus higher prices and higher real GDP or quantity of output. If short-run aggregate supply increases at every price level than the supply curve shifts to the right. From the short-run to the long-run the new equilibrium forms from an increase willingness to sell, thus prices reduce to original equilibrium and output increases further. Recap: Prices stay constant while real GDP or total quantity of output increases.

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