Posted by **Anonymous** on Saturday, December 6, 2008 at 12:31am.

The “Great Moderation” since 1985 could be due either to

smaller demand stocks when compared to the period prior to 1985 or to

a better response by monetary policymakers since 1985 to the same

demand shocks that occurred prior to 1985. Evidence to determine

which of these arguments is correct may be found by examining the

behavior of the interest rate since 1985. If the Great Moderation is

due to smaller demand shocks, then less variation in real GDP has

been accompanied by less variation in the interest rate as well. On

the other hand, if the Great Moderation is due to better response by

monetary policymakers to the same demand shocks as previously, then

the decline in the variation of real GDP has been accompanied by an

increase in the variation of the interest rate. Evaluate these

arguments using the IS-LM model.

- Macroeconomics -
**economyst**, Monday, December 8, 2008 at 11:38am
Do you have a question?

Or is your task to evaluate the arguments made using an IS/LM framework. If so, do a little research, then take a shot. I or others will be glad to critique your answer.

- Macroeconomics -
**Jeanine**, Saturday, December 20, 2008 at 3:34am
It a question that asks to evaluate the arguments made using an IS/LM. Please help.

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