Assume that the J-curve is true. What would the DD curve look like during the early period of the J-curve (where the value effect dominates)? What would the effect of temporary changes in monetary and fiscal policy look like with this DD curve?
I assume that the DD curve might be downward sloping because of the value effect, but I'm unsure how temporary changes in government spending and temporary changes in the money supply will affect the AA and DD schedules in this scenario. Would somebody please explain?