Show both the effect of the positive demand shock

Reference no: EM131305921

Use the IS-MP model (including the output gap Phillips curve) to analyze how the Federal Reserve would respond to a significant positive demand shock. Assume that the economy was in long-run macroeconomic equilibrium before the demand shock. Use a graph to show both the effect of the positive demand shock and how the Fed might respond.

Reference no: EM131305921

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