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A major component of the recovery plan is the use of fiscal policy and monetary policy to help stabilize the economy. With the use of
A major component of the recovery plan is the use of fiscal policy and monetary policy to help stabilize the economy. With the use of appropriate IS-LM diagrams, illustrate:
a. The economic impact of expansionary fiscal policy if the central bank seeks to maintain the interest rate
b. . Given your response in 'a' above, use the Phillips curve to illustrate on separate diagrams:
i. The impact of the monetary policy in the short run; and
ii. The impact of the monetary policy if the authorities announced its intent in advance.
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