9.) An economy is in long-run macroeconomic equilibrium with an unemployment rate of 5% when the government passes a law requiring the central bank to use monetary policy to lower the unemployment rate to 3% and keep it there. How could the central bank achieve this goal in the short run? What would happen in the long run? Illustrate with a diagram.

Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand
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9.) An economy is in long-run macroeconomic equilibrium
with an unemployment rate of 5% when the government
passes a law requiring the central bank to use monetary
policy to lower the unemployment rate to 3% and keep
it there. How could the central bank achieve this goal
in the short run? What would happen in the long run?
Illustrate with a diagram.
Transcribed Image Text:9.) An economy is in long-run macroeconomic equilibrium with an unemployment rate of 5% when the government passes a law requiring the central bank to use monetary policy to lower the unemployment rate to 3% and keep it there. How could the central bank achieve this goal in the short run? What would happen in the long run? Illustrate with a diagram.
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