Consider the expenditure shock in Figure 13.12: the AE curve shifts to the right in 2020 and
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FIGURE 13.12 Countercyclical Policy with Time Lags (A) Real interest rate (B) Output Without time lags With time lags 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 Year Year AE curve shifts to right. AE curve shifts back AE curve shifts to right. AE curve shifts back to initial position. to initial position. (C) Inflation rate With time lags Without time lags 2019 2020 2021 2022 2023 2024 Year
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