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Assume the Economy Is in Equilibrium at ??= 0,where Real

Question 52

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Assume the economy is in equilibrium at ??= 0,where real GDP equals potential GDP,and the economy experiences a positive demand shock.What policy could the Bank of Canada use to keep the inflation rate from rising? Use the IS-MP model and the Phillips curve to explain your answer.

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Before the demand shock,real GDP equals ...

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