Assume that the /S-MP model on the right shows an economy that was in long-run macroeconomic equilibrium. Then, there was a significant positive demand shock. 1.) Using the 3-point curved line drawing tool, show the effect of the positive demand shock. Properly label your curve. 2.) Using the line drawing tool, show how the Fed might respond to restore long-run equilibrium. Properly label your curve. Carefully follow the instructions above, and only draw the required objects. Real interest rate Y=YP 0 MP₁ IS₁ Output gap Q Q
Assume that the /S-MP model on the right shows an economy that was in long-run macroeconomic equilibrium. Then, there was a significant positive demand shock. 1.) Using the 3-point curved line drawing tool, show the effect of the positive demand shock. Properly label your curve. 2.) Using the line drawing tool, show how the Fed might respond to restore long-run equilibrium. Properly label your curve. Carefully follow the instructions above, and only draw the required objects. Real interest rate Y=YP 0 MP₁ IS₁ Output gap Q Q
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
Section: Chapter Questions
Problem 1CQ
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![Assume that the IS-MP model on the right shows an economy that was in long-run
macroeconomic equilibrium. Then, there was a significant positive demand shock.
1.) Using the 3-point curved line drawing tool, show the effect of the positive
demand shock. Properly label your curve.
2.) Using the line drawing tool, show how the Fed might respond to restore
long-run equilibrium. Properly label your curve.
Carefully follow the instructions above, and only draw the required objects.
Click the graph, choose a tool in the palette and follow the instructions to create your graph.
part
remaining
Clear All
Real interest rate
Y=yP
0
MP₁
IS₁
Output gap
Final Check
◄
?
▶](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb97732da-e9c8-4ce7-bbdb-354a6daefa47%2F19b8ccfe-b1ca-413e-9872-a2ca72ccc54f%2Fx7wfuxi_processed.png&w=3840&q=75)
Transcribed Image Text:Assume that the IS-MP model on the right shows an economy that was in long-run
macroeconomic equilibrium. Then, there was a significant positive demand shock.
1.) Using the 3-point curved line drawing tool, show the effect of the positive
demand shock. Properly label your curve.
2.) Using the line drawing tool, show how the Fed might respond to restore
long-run equilibrium. Properly label your curve.
Carefully follow the instructions above, and only draw the required objects.
Click the graph, choose a tool in the palette and follow the instructions to create your graph.
part
remaining
Clear All
Real interest rate
Y=yP
0
MP₁
IS₁
Output gap
Final Check
◄
?
▶
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