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1. While fears of Europe falling into recession turned out to be unwarranted, the US economy is continuing to slow. Using the IS-LM model, and
1. While fears of Europe falling into recession turned out to be unwarranted, the US economy is continuing to slow. Using the IS-LM model, and not assuming anything about monetary or fiscal policy, evaluate the effect of Europe's avoiding recession on the US economy. Briefly explain how this can potentially frustrate Fed efforts to slow the US economy by its monetary tightening. 2. This question will explore the actual (empirical) relationship between a key monetary policy indicator interest rate and the overall level of economic activity. a) According to economic theory, what should the relationship between these two variables be? Briefly explain the basis for this. the J.year
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