Would it be wise for a central bank to adopt the plan

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Reference no: EM131221786

Suppose an economist has a bright idea: a central bank should lean against the wind when output falls but not when it rises. In other words, policymakers should lower the interest rate below the neutral level when a recession occurs but not raise it in a boom.

a. Why might this plan appear attractive?

b. Would it be wise for a central bank to adopt the plan?

Reference no: EM131221786

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