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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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