Suppose the Fed announces today that it is lowering the fed funds rate by 50 basis points
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Suppose the Fed announces today that it is lowering the fed funds rate by 50 “basis points” (that is, by half a percentage point). Using the IS-MP diagram, explain what happens to economic activity in the short run. What is the economics underlying the response in the economy?
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The MP curve shifts down and so ...View the full answer
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