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Consider the short run. Assume that a large open economy (such as the United States) faces an exogenous shock to its general prices level. Specifically,
Consider the short run. Assume that a large open economy (such as the United States) faces an exogenous shock to its general prices level. Specifically, assume that the large open economy suddenly faces increased inflation. What is the impact (if any) of this exogenous shock on U.S. GDP, consumption, investment, interest rates, and net exports? Explain.
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