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Add to your graph a new line depicting a sudden decrease in Aggregate Demand, e.g. because of a government imposed lock-down. Short Answer: Describe the
Add to your graph a new line depicting a sudden decrease in Aggregate Demand, e.g. because of a government imposed lock-down.
Short Answer: Describe the overall impact of both shocks upon inflation, interest rates, FX rate if capital is very mobile (no need to show BP curve if you understand the intuition), GDP gap and the unemployment rate. Using short hand (variables & up/ down arrows) is perfectly fine.
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