In 2001, the Fed pursued an expansionary monetary policy and reduced interest rates. At the same time,
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In 2001, the Fed pursued an expansionary monetary policy and reduced interest rates. At the same time, President George W. Bush pushed through legislation that lowered income taxes.
a. Illustrate the effect of such a policy mix on output.
b. How does this policy mix differ from the Clinton-Greenspan mix?
c. What happened to output in 2001? How do you reconcile the fact that both fiscal and monetary policies were expansionary with the fact that growth was so low in 2002?
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a The policy mix of an expansionary monetary policy by the Fed reducing interest rates and a fiscal policy of lowering income taxes can be illustrated ...View the full answer
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