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Using aggregate demand and aggregate supply, explain what happens in the short run if the Federal Reserve raises interest rates in the economy? Assume that
Using aggregate demand and aggregate supply, explain what happens in the short run if the Federal Reserve raises interest rates in the economy? Assume that the economy is at full employment before the interest rate increase. Be sure to detail what happens to:
- aggregate demand
- the price level
- the level of GDP
- and unemployment.
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