Suppose you are chair of the Federal Reserve in 1995. You believe that potential output follows the dotted line after 1993, but in actuality, it follows the line denoted "True potential output." The current state of the economy is given by the curve "Actual output." Given the information in the figure, you because you believe the economy is in a ________, but your advice instead OUTPUT 1993 True potential output Actual output Perceived potential output 1995 TIME O lower interest rates; recession; accelerates inflation O raise interest rates; boom; accelerates a recession O keep interest rates the same; boom; accelerates inflation O Not enough information is given. lower interest rates; boom; increases unemployment
Suppose you are chair of the Federal Reserve in 1995. You believe that potential output follows the dotted line after 1993, but in actuality, it follows the line denoted "True potential output." The current state of the economy is given by the curve "Actual output." Given the information in the figure, you because you believe the economy is in a ________, but your advice instead OUTPUT 1993 True potential output Actual output Perceived potential output 1995 TIME O lower interest rates; recession; accelerates inflation O raise interest rates; boom; accelerates a recession O keep interest rates the same; boom; accelerates inflation O Not enough information is given. lower interest rates; boom; increases unemployment
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter33: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 3PA
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