Question 6 Suppose the U.S. economy is experiencing a positi…
Question 6 Suppose the U.S. economy is experiencing a positive demand shock, and current output is above its potential value (which is to say “short-run” output is positive). Draw this scenario in an IS-MP diagram. That is, draw an IS curve and MP curve consistent with there being a positive demand shock and the Federal Reserve setting the real interest rate so that current output is above potential. Label these curves “” and “”. Label your axes in the diagram, and include labels for “0” on the horizontal axis and “