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Suppose a country is experiencing a deflation while real GDP is below potential GDP.
(A)If the country's central bank decides it wants to reinflate the economy, what type of policy should it pursue?
(B)Suppose this policy is enacted. What will happen to the real interest rate and investment when the economy returns to potential?
(C)Suppose the central bank decides not to reinflate the economy, and the economy eventually returns to potential GDP. How will the long-run equilibrium values for the real interest rate and investment differ from your answer in (B)?
Selling Price
The set amount of money for which a product or service is sold to customers.
Spot Rates
The present cost at which a specific asset is available for purchase or sale with immediate delivery.
Selling Price
The amount of money for which an item is sold to a buyer.
Hedge Transaction
A financial agreement or trade designed to reduce or eliminate the risk of future price fluctuations.
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