Suppose that consumption expenditures and investment expenditures are very inelastic with respect to the real interest rate.

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Suppose that consumption expenditures and investment expenditures are very inelastic with respect to the real interest rate. What does this imply about the power of monetary policy relative to fiscal policy in closing a positive output gap? Explain your results with the aid of diagrams.

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Macroeconomics

ISBN: 978-0132991339

5th edition

Authors: Stephen d. Williamson

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