Potential difficulties arise with the longer-run effects of this monetary policy decision, however. In the model at hand, we see the prediction that these effects are uncertain as well as extended over multiple periods. Explain why or why not. The increase in A in period T has no effects on the period T IS or LM curves. This is why the critics caution Greenspan and the Fed that there is no need to use monetary policy to apply the brakes to the economy out of fear of inflation as long as the productivity growth rate remains high.
Various answers are acceptable here.
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