Suppose the Federal Reserve is using an interest rate as a target, while real income is the ultimate policy target, and there is an autonomous drop in business investment that the Federal Reserve had not predicted. Use the IS – LM model to show the effects of the shock. Would income have been affected less or more if the Federal Reserve had been using a money supply target?
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here