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Problem 2: The Taylor rule John Taylor of Stanford University proposed the following monetary policy rule Rtr:m(qrt)+a}7; That is, Taylor rule suggests that monetary policy

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Problem 2: The Taylor rule John Taylor of Stanford University proposed the following monetary policy rule Rtr:m(qrt)+a}7; That is, Taylor rule suggests that monetary policy should increase the real interest rate whenever output exceeds potential. Cmnbine this MP rule with the IS curve derived in problem 1 to get a new aggregate demand curve. How does it differ from the aggregate demand curve in 1 d}. How does it differ from the one in the textbook Ch 13

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