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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

In each of the figures (a–d) that follow, the starting point is 1. Which part (a, b, c, or d) illustrates each of the following?

  1. a. Friedman natural rate theory (short run)
  2. b. New classical theory (unanticipated policy, short run)
  3. c. Real business cycle theory
  4. d. New classical theory (incorrectly anticipated policy, over-estimating increase in aggregate demand, short run)
  5. e. Policy ineffectiveness proposition (PIP)

images

(a)

To determine

The figure showing Friedman natural rate theory.

Explanation

In Figure 1, panel (a) shows the new classical theory with incorrectly anticipated policy, panel (b) shows Friedman natural rate theory and policy ineffectiveness proposition, panel (c) shows the real business cycle theory, and panel (d) shows the new classical theory with unanticipated policy.

Friedman natural rate theory is represented by panel (b) in Figure 1...

(b)

To determine

The figure showing new classical theory with unanticipated policy.

(c)

To determine

The figure showing real business cycle theory.

(d)

To determine

The figure showing new classical theory with incorrectly anticipated policy.

(e)

To determine

The figure showing policy ineffectiveness proposition.

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