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Suppose that in March the government undertakes the type of policy that is necessary to bring the economy back to the natural level of output
Suppose that in March the government undertakes the type of policy that is necessary to bring the economy back to the natural level of output in the preceding scenario. In July 2023, U.S. exports increase because Japan eliminates all trade restrictions on U.S. goods. Because of theconsumer preferences associated with implementing monetary and fiscal policy, the impact of the government's new policy will likelypush the economy beyond the natural level of output once the effects of the policy are fully realized.
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