Draw graphs showing long-run macroeconomic equilibrium

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1. Draw graphs showing long-run macroeconomic equilibrium in the IS-MP model. One of your graphs should show the output gap version of the Phillips curve. In long-run equilibrium, what does the output gap equal, and what is true about the actual and expected inflation rates?

2. When the Federal Reserve lowers the real interest rate, does the MP curve shift? Does the IS curve shift? Does the output gap Phillips curve shift? Briefly explain.

Reference no: EM131303759

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