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c) (20 POINTS) Now show how graphs 1) through 4) are influenced by this longer-run development. Note again that we assume that before these longer
c) (20 POINTS) Now show how graphs 1) through 4) are influenced by this longer-run development. Note again that we assume that before these longer run developments take hold, the FE line in graph 3) and the LRAS in graph 4) is set at Y . Now let these longer run developments take hold, i.e., these supply side effects, and label this final equilibrium as point C. Again, please make sure you refer to each diagram individually explaining how and why we get to point C (i.e., provide intuitive economic reasoning!). Be sure to include a discussion of why the real interest rate has to change the way it does - hint, the money market
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