Explain is curve with inflation, Macroeconomics

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Q. Explain IS curve with inflation?

The IS curve with inflation

We can draw IS curve for a given value of π^e. As earlier explained, IS curve isn't affected by changes in P. Though it will shift upwards when π^e increases.

1819_Explain IS curve with inflation.png

Figure: The IS curve and expected inflation.

If π^e increases, R should increase by the same amount to keep r and Y_D unaltered.

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