Use the ISMP model (including the output gap Phillips curve) to analyze how the Federal Reserve would
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Use the IS–MP model (including the output gap Phillips curve) to analyze how the Federal Reserve would respond to a large positive demand shock. Assume that the economy was in longrun macroeconomic equilibrium before the demand shock. Use a graph to show both the effect of the positive demand shock and how the Fed might respond.
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Money, Banking, and the Financial System
ISBN: 978-0134524061
3rd edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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