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How do the new Keynesian and real business cycle models differ on the ability of inflationary expectations to affect output?(6 marks) Suppose the government announces
- How do the new Keynesian and real business cycle models differ on the ability of inflationary expectations to affect output?(6 marks)
- Suppose the government announces that it will bring the federal budget deficit to zero, over the next ten years, with no change in tax rates. Describe the effects of such a policy according to the three business cycle models, assuming that the policy is fully credible.(7 marks)
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