An economy is in long - run macroeconomic equilibrium with an unemployment rate of 5%
Chapter 0, Problem 7(choose chapter or problem)
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 lower 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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