How the economy would respond to a positive aggregate demand

Reference no: EM13199882

Suppose that imports depend not only on potential GDP, but on short-run GDP as well. That is, the imports equation can be re-written to include a new parameter n-bar that relates imports to short-run output. Derive the new IS curve and explain how the economy would respond to a positive aggregate demand shock under this new specification.

Reference no: EM13199882

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