Illustrate the effect of such a policy mix on output

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The Bush-Greenspan policy mix

In 2001, the Fed pursued a very expansionary monetary policy. At the same time, President George W. Bush pushed through legislation that lowered income taxes.

a. Illustrate the effect of such a policy mix on output.

b. How does this policy mix differ from the Clinton-Greenspan mix?

c. What happened to output in 2001? How do you reconcile the fact that both fiscal and monetary policies were expansionary with the fact that growth was so low in 2002? (Hint: What else happened?)

Reference no: EM131145809

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