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Let's consider the recent announcement of the effectiveness of various COVID vaccines. Suppose this news increased optimism about the trajectory for the economy and boosted

Let's consider the recent announcement of the effectiveness of various COVID vaccines. Suppose this news increased optimism about the trajectory for the economy and boosted both consumption and investment spending.

Was the output gap likely positive, negative, or zero before the shock?

Based on the IS-LM-PC framework, would the output gap increase, decrease, or stay the same in response to the optimism shock? Briefly explain.

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