Question: Not all changes in production costs are bad for the economy. During the 1990s, changes in technology lowered costs. Use the ISMP model including the

Not all changes in production costs are bad for the economy. During the 1990s, changes in technology lowered costs. Use the IS–MP model including the Phillips curve to analyze the situations described below.
a. Suppose the Fed does not change the real interest rate. What will happen to the inflation rate?
b. Suppose that the Fed does not want the inflation rate to change. What should it do to the real interest rate?

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