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Table of contents
The Classical Theory Using AD-AS Model
Classical Theory Assumptions
A Circular Flow view of the Classical Economy.
Implication of the Classical Model Assumptions
Recessionary Gap: High unemployment
Recessionary Gap: Classical Adjustment
Expansionary Gap: Shortages of workers and resources
Expansionary Gap: The Classical Adjustment
So what causes a gap?
Supply Shocks: How a Contractionary Gap Happens
Classical Theory Policy Recommendations