The dynamic aggregate demand curve shifts to the right to, Ask an Expert

Economics

Suppose a central bank does not satisfy the Taylor principle. In period t there is a one-time shock to aggregate demand. That is, for one period only, the dynamic aggregate demand curve shifts to the right, to ADt ; in the next period, it returns to its original position.

• Use a graph to analyze the impact of the shock.
• Does this analysis contradict or reinforce the Taylor principle as a guideline for the design of monetary policy?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M954277

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