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Suppose there is one company in an economy which has
a fixed supply of shares in the short run. Suppose there
is new information that causes expectations of lower prof-
its. How does this new stock market equilibrium affect
final output and the final price level of the economy if
you assume that autonomous consumption spending and
household wealth are positively related?
(a) real GDP increases; price decreases
(b) real GDP decreases, price increases
(c) real GDP decreases, price decreases
(d) real GDP increases, price stays constant
can Someone please explain?
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