Low interest-rate target in the face of a rightward shift

Reference no: EM13684277

The Fed’s decided to maintain its low interest-rate target in the face of a rightward shift of the AD curve in the late 1960s which led to an inflationary equilibrium. Discuss the long-run and short-run costs and benefits of the Fed are other two options: raising its interest-rate target to neutralize the positive demand shocks, or doing nothing.

Reference no: EM13684277

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