Order the answer to: Consider a simplified version of the Taylor rule, where monetary

EssayParlour business-economics Order the answer to: Consider a simplified version of the Taylor rule, where monetary

business-economics

Order the answer to: Consider a simplified version of the Taylor rule, where monetary

Question (a) Draw an IS-MP diagram, but instead of the usual MP curve, plot the simplified version of the Taylor rule. You might label this curve MPR for ??monetary policy rule.?
(b) Now consider the effect of a positive aggregate demand shock in the IS-MPR diagram. (An example might be a fiscal stimulus.) Compare and contrast the effect of this shock on the economy in the standard IS-MP diagram versus the IS-MPR diagram. Why is the result different?
(c) Economists refer to the result in the IS-MPR diagram as ??crowding out.? What gets crowded out and why?
Subject business-economics

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