Assume a closed economy. Suppose you have the following information regarding Country A: Long run real...

Assume a closed economy. Suppose you have the following information

regarding Country A: Long run real GDP growth rate = 2.5%, natural rate of

unemployment = 5%, long run inflation rate = 2.5%. Currently, real GDP is

growing at 1.4%, unemployment is at 6.4%, and inflation is .7%.

a. Using the IS-LM model and AD-AS, describe fully the current state of the

economy both graphically and in words.

b. What monetary policy measures would you advocate? Why? How would

they work and what would they do in the short run? In the long run?

c. What fiscal policy measures would you advocate? Why? How would

they work and what would they do in the short run? In the long run?

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Rahul Sunny answered 1 year ago

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