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3 Cards in this Set
- Front
- Back
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Define the rs |
Stabilizing rate of interest The interest associated with equilibrium.
Medium-run equilibrium ye=> ws=ps |
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Inflation shock |
Refers to an exogenous shift on the PC curve .Cause * Natural disasters: .drought-> reduce agricultural output->raises prices .Temporary burst of union militancy -> pushes up wages |
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CB steps after an inflation shock |
Step 2 .Use IS to find increase in the real r required to get back onto the MR .Higher r dampens y and Г starts to fall .CB gradually reduces r until y rises to ye and Г fall to ГT |
