|Question||b. Fast approach: Try to add 4% to AD in Year 1, but mistakenly add 7% instead (through some mix of excess bank lending and irrational exuberance). In the second year, try to correct by cutting back by 3%, but mistakenly cut back by 4% (through some mix of slower bank lending and investors?? loss of confidence). What will real growth equal each year?
c. You can see how the ??best approach? is a matter of taste, but which method would you expect a central banker to prefer if Congress has to decide whether to reappoint the central banker to a new four-year term in a few months?