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In: Economics

(b) Suppose the economy is initially above potential GDP, and the actual inflation rate is greater...

(b) Suppose the economy is initially above potential GDP, and the actual inflation rate is greater than the expected inflation rate. Use IS-LM model to explain what happens if the Bank Nagara (BNM) adjusts the interest rate to achieve the goal of price stability.

(c) If economy is initially at full employment with real GDP to potential GDP. Use the IS-LM model to explain what happens if the economy experiences a recession both with and without automatic stabilizers.

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Expert Solution

Rahul Sunny answered 7 months ago
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