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The goal of an easy policy is to reduce unemployment. Business are then able to produce more output without having to pay more for the additional resources. They retire at age 65 and don't begin to work until age 18 or 22?

An increase in exports will do what to the graph above? It is inflation caused by a decrease in AS.

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Why is the AD curve downward sloping from left to right? During the recovery economic output increases, therefore unemployment is declining and inflation is rising.

Since many resources are unemployed, businesses will not have to pay a higher price to employ them. Increase in AS shifts to the right. The third reason is the foreign purchases effect.


The graph below shows how we can illustrate this level of output under normal conditions of full employment.


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