During the period of Communist rule in Eastern Europe, the governments imposed wage and price controls. Under these controls, some prices were unchanged for years at a time. Most economists believe that over time, price controls distort the allocation of resources in an economy. Assuming that this view of price controls is correct, how would they affect long-run aggregate supply? As the countries of Eastern Europe moved toward market-oriented economies, they removed most wage and price controls. How would the removal of these controls have affected aggregate demand and aggregate supply?
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