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Given that the economy can correct itself and return to potential GDP, why would the Federal Reserve pursue expansionary monetary policy following a negative aggregate demand shock?

How could the Fed pursuing expansionary monetary policy be preferable to the economy correcting itself?

On the other hand, how could the Fed's expansionary monetary policy hurt the economy given the lags in the impact of monetary policy actions?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92057399

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