Overview
The pandemic experience featured the following four phases. Use the IS‐MP and IA‐AD graphs with the natural rate of output to show each phase. You may need multiple versions of each figure for each phase.
a. A sharp increase in credit spreads, a large decline in output, disinflation, and monetary policy at the ZLB.
b. Large increases in government expenditures and monetary policy s ll at the ZLB, but now with a large increase in infla on and high output.
c. A rapid disinflation along with high output.
d. Moderately high but stable inflation and output.
e. Discuss the behavior of 𝑌∗ across these periods and give some possible explanations for why it might have behaved in this way.