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Suppose the Central Bank Decides to Switch from Policy Rule

Question 71

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Suppose the central bank decides to switch from policy rule A to policy rule B as shown in the table below. Use the analysis presented in the text to explain what will happen to the AD curve. Suppose the central bank decides to switch from policy rule A to policy rule B as shown in the table below. Use the analysis presented in the text to explain what will happen to the AD curve.

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As a result of the switch in the policy ...

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