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2. Suppose that there is a wave of pessimism in the economy due to Covid-19 and, as a result, the economy is operating below its
2. Suppose that there is a wave of pessimism in the economy due to Covid-19 and, as a result, the economy is operating below its natural level of output with high unemployment and low inflation. So, the central bank decides to stimulate the economy. Assume a small open economy with perfect capital mobility and a flexible exchange rate systemd) What happens to employment and inflation? Does the rate of economic growth increase
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