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Question 3 An economy is currently at full employment. a} Using an AD-AS graph, illustrate the shortrun impact of an increase in consumer expectations about

Question 3 An economy is currently at full employment. a} Using an AD-AS graph, illustrate the shortrun impact of an increase in consumer expectations about theirfuture income. [5] b) Assume that this is an open economy with FLEXIBLE exchange rates. Explain how monetary policy can help the economy close the output gap caused by the event in part (a). IS]

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