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Unformatted text preview: III. I NFLATION A DJUSTMENT (IA) A. Behavior of inflation B. IA curve C. Short-run equilibrium D. Transition to long-run equilibrium IV. T WO E XAMPLES OF S HOCKS A. A decrease in government purchases 1. Effect in IS-MP framework 2. Effect in the short run 3. Effect in the long-run 4. Where do we end up? B. An increase in potential output 1. Inflation shock versus supply shock 2. Effect in the short run 3. Effect in the long run 4. Where do we end up?...
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This note was uploaded on 02/28/2012 for the course ECON 134 taught by Professor Davidromer during the Spring '12 term at University of California, Berkeley.
- Spring '12