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Consider a Central Bank that is trying to stabilize output in response to an expansionary fiscal policy implemented by the government. (1) Explain how a
Consider a Central Bank that is trying to stabilize output in response to an expansionary fiscal policy implemented by the government.
(1) Explain how a Central Bank should act to stabilize output? What are the direct and indirect effects on the economy as a result of monetary policy. (2) Now suppose the Central Bank is interested in stabilizing prices. Explain how the economy will react to this policy.
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