8. Suppose that expected ination tomorrow is the actual ination tomorrow,
that is, e
t = t . Explain what would happen with the Phillips Curve
9. Suppose the IS curve shifts to the left due to a recession. Monetary Policy
wants to help in order to restore the original level of short run output
~ Yt = 0 . Explain in a graph how can the Fed achieve this goal.
10. Suppose the Fed and the Government agree the economy should increase
the interest rate but should leave the short run output at the same level
~ Yt = 0 . Explain in a graph how can Monetary Policy and Fiscal Policy
coordinate to achieve this goal.
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