If expectations are formed rationally,wages and prices are not completely flexible in the short run,and policy is correctly anticipated,increases in aggregate demand will stimulate the economy to higher levels of Real GDP and lower levels of unemployment in

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The given scenario describes the short run aggregate supply curve (SRAS) which is upward sloping but not perfectly elastic due to wage and price stickiness. In the short run, increases in aggregate demand will lead to higher output and lower unemployment. However, in the long run, wages and prices become more flexible and adjust to the increased demand, causing the SRAS curve to shift leftward until the economy reaches its potential output or full employment level. Therefore, in the long run, increases in aggregate demand do not have a significant impact on output, and the economy returns to its natural level of output and unemployment.

If Expectations Are Formed Rationally,wages and Prices Are Not Completely