Suppose the Bank of Canada Has Just Learned That Some

question 88

Essay

Suppose the Bank of Canada has just learned that some foreign economies are headed for recession,which will reduce Canadian exports.This is an economic shock that shifts the IS curve down.What would you do in response to the shock if you want to keep the economy at full-employment equilibrium under each of the following cases?
a.You use the classical (RBC)model.
b.You use the Keynesian (efficiency wage)model.
c.You use the extended classical model with misperceptions.
In each case,show the IS-LM-FE diagram associated with your answer.

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Definitions:

Stereocenter

An atom in a molecule that is bonded to four different groups, creating different spatial arrangements.

Enantiomer

Molecules that are mirror images of each other and cannot be superimposed onto each other, commonly found in chiral molecules.

Diastereomers

Non-mirror-image stereo isomers that have varying physical and chemical properties from each other.

Stereocenters

Chiral centers in a molecule, points at which the molecule can adopt different spatial arrangements leading to different stereoisomers.