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QUESTION 1 Suppose the Central Bank pursued an expansionary monetary policy, but because the public expected this action, it simultaneouslyraised its expectation of the price
QUESTION 1
Suppose the Central Bank pursued an expansionary monetary policy, but because the public expected this action, it simultaneouslyraised its expectation of the price level. What would happen to output and the price level in the short run? Compare this result to the outcome if the Central Bank expanded the money supply but the public did not change its expectation of the price level.
Note: Analyse your discussion and draw the AD-AS diagram
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