When the Federal Reserve reduces its policy interest rate, how, if at all, is the IS curve
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Question:
- When the Federal Reserve reduces its policy interest rate, how, if at all, is the IS curve affected? Briefly explain.
- "If nominal GDP rises, velocity must rise." Is this statement true, false, or uncertain? Explain your answer.
- If households and firms believe the economy will be in a recession in the future, will this necessarily cause a recession, or have any impact on output at all?
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