decrease in aggregate demand will decrease both current inflation and the

Decrease in aggregate demand will decrease both

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Page Ref: 918 - 919/536 - 537 Learning Outcome: Macro - 12: Explain how monetary policy influences interest rates, aggregate demand, real GDP and inflation. 227) According to the Taylor rule, does the target for the federal funds rate responddifferently for an increase in inflation caused by an increase in aggregate demand andfor an increase in inflation caused by a decrease in short-run aggregate supply? Explainwhether there is or is not a difference in how the target for the federal funds ratechanges.227) Page Ref: 918 - 919/536 - 537 Learning Outcome: Macro - 12: Explain how monetary policy influences interest rates, aggregate demand, real GDP and inflation. 228) Write out the expression for the Taylor rule. Use the Taylor rule to explain how a declinein real GDP below potential GDP will affect the Federal Reserveʹs target for the federalfunds rate.228) Page Ref: 918 - 919/536 - 537 Learning Outcome: Macro - 12: Explain how monetary policy influences interest rates, aggregate demand, real GDP and inflation. 70
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