Suppose the Fed has just learned that some foreign economies are headed for recession,which will reduce U.S.exports.This is an economic shock that shifts the IS curve down.What would you do in response to the shock if you want to keep the economy at full-employment equilibrium under each of the following cases?
(a)You use the classical (RBC)model.
(b)You use the Keynesian (efficiency wage)model.
(c)You use the extended classical model with misperceptions.
In each case,show the IS-LM-FE diagram associated with your answer.

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The Answer of Suppose the Fed has just learned that some foreign economies are headed for recession,which will reduce U.S.exports.This is an economic shock that shifts the IS curve down.What would you do in response to the shock if you want to keep the economy at full-employment equilibrium under each of the following cases?
(a)You use the classical (RBC)model.
(b)You use the Keynesian (efficiency wage)model.
(c)You use the extended classical model with misperceptions.
In each case,show the IS-LM-FE diagram associated with your answer.

Suppose the Fed Has Just Learned That Some Foreign Economies