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5. An economy is facing the inationary gap shown in the accompanying diagram. To eliminate the gap, should the central bank use expansionary or contractionary

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5. An economy is facing the inationary gap shown in the accompanying diagram. To eliminate the gap, should the central bank use expansionary or contractionary mone tary policy? How will the interest rate. investment spending. consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inationary gap? Potential Y,, Y1 output

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