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In an economy where the income elasticity of money demand is greater than the price elasticity - Increase in aggregate demand as a result

 

In an economy where the income elasticity of money demand is greater than the price elasticity - Increase in aggregate demand as a result of the expansionary policies followed due to the elections and, - Negative supply shock as a result of a horrible earthquake have been experienced at the same time. What should be the appropriate monetary policy strategy for the Central Bank, which aims price stability in this country? Explain the determination of the true intermediate target and the operating target in the price stability process by drawing related figures.

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