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9 February, 02:25

Let's examine how the goals of the Fed influence its response to shocks. Suppose that in scenario A the Fed cares only about keeping the price level stable and in scenario B the Fed cares only about keeping output and employment at their natural levels. Explain how in each scenario the Fed would respond to the following.

A. An exogenous decrease in wealth.

B. An exogenous increase in the price of oil.

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  1. 9 February, 04:48
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    An exogenous decrease in wealth
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