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Suppose the Central Bank follows the following policy reaction function = + 0.5 ( ) + 0.5( ) where denotes the current real interest rate,

Suppose the Central Bank follows the following policy reaction function = + 0.5 ( ) + 0.5( ) where denotes the current real interest rate, Y denotes current real GDP, Y* denotes potential real GDP, denotes the current inflation rate and denotes the target inflation rate. a. What will the effect of an increase in current inflation rate, holding everything else constant, on the aggerate demand

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