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Suppose parameters of the IS curve are: a : 0; b = 0.20;r= 1.5% and the economy faces a real interest rate of 1.5%. Show
Suppose parameters of the IS curve are: a : 0; b = 0.20;r= 1.5% and the economy faces a real interest rate of 1.5%. Show ryp how to derive the lS-curve from the national income accounting identity, then explain what happens to short-run output in each of the following cases. 1. ac increases by 3 percentage points. 2. ag decreases by 1.5 percentage point. 3. The real interest rate rises from 1.5% to 5%. 4. Potential output increases by 12%. For this question, submit one Pdf le that contains all your answers
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