6. Try the following experiment: Flip a coin fifty times, keeping track of the results. Think of...

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6. Try the following experiment: Flip a coin fifty times, keeping track of the results. Think of each "heads" as a small positive shock that increases output by one unit; similarly, think of each "tails" as a small negative shock that reduces output by one unit. Let the initial value of output, Y, be 50, and graph the level of output over time as it is hit by the "positive" and "negative" shocks (coin flips). For example, if your first four flips are three heads and a tail, output takes the values 51, 52, 53, 52. After fifty flips, have your small shocks produced any large cycles in output?

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Macroeconomics Value Edition

ISBN: 978-0136114895

7th Edition

Authors: Andrew B. Abel ,Ben Bernanke ,Dean Croushore

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