The usual analytical method in macroeconomics is to begin in long-run equilibrium, shock the economy, hold all else equal, and then evaluate how the economy responds to that single shock until it returns to equilibrium. 1. Identify the forces at work in the economy's re- equilibration process. 2.Comment on whether the zero-output gap will occur at the same trend level of output or a lower level in the new equilibrium. Why might this matter?

The usual analytical method in macroeconomics is to begin in long-run equilibrium, shock the economy, hold all else equal, and then evaluate how the economy responds to that single shock until it returns to equilibrium. 1. Identify the forces at work in the economy's re- equilibration process. 2.Comment on whether the zero-output gap will occur at the same trend level of output or a lower level in the new equilibrium. Why might this matter?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section16.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 3SQP

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