Question: Starting with the economy in long run equilibrium use the aggregate
Starting with the economy in long-run equilibrium, use the aggregate demand-aggregate supply framework to illustrate what would happen to inflation and output in the short run if there were a rise in consumer confidence in the economy. Assuming the central bank takes no actionto offset this rise in confidence, what would happen to inflation and output in the long run? What policy adjustment is the central bank undertaking?
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