Suppose the Central Bank Implements Monetary Expansion in the Current

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The Answer is In the current period, the LM curve will shift down causing the current interest rate to fall and current output to rise. The expectation that this will continue will cause individuals to expect lower future rates and higher future output. The lower future rates will raise current consumption and current investment. The higher future output will do the same. So, we will also see a rightward shift in the current IS curve. This will tend to raise current interest rate and current output as well.

Suppose the Central Bank Implements Monetary Expansion in the Current

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