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Suppose the parameters of the IS curve area= 0, b=3/4, r = 2% and the real interest rate is initiallyR=2%. The output gap in the
Suppose the parameters of the IS curve area= 0, b=3/4, r = 2% and the real interest rate is initiallyR=2%. The output gap in the short run when the demand shock increases by 1% will
a) Increase by 1.5%
b) Decrease by 1.5%
c) Increase by 1%
d) None of the above
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