[challenge question] An economy is in long-run macroeconomic equilibrium with an unemployment rate of 5% when the government passes a law requiring
[challenge question] An economy is in long-run macroeconomic equilibrium with an unemployment
rate of 5% when the government passes a law requiring the central bank to use monetary policy to
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Order Paper Nowlower the unemployment rate to 3% and keep it there. How could the central bank achieve this goal in
the short run? What would happen in the long run? Illustrate with a diagram.
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