Consider a hypothetical economy where: C(Ya) = 12 + 0.75 x (Y - T) • I(r) = 124 -1 x r • G = 120 • t = 20% 3. Assume that inflation is zero, so that i = r. This economy's central bank follows a given Monetary Policy Rule: r = i = 0.025 × Y +0.0003 x P , where P is the price level. Given this and the expression for the IS Curve, write down an expression for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the form P = ....)
Consider a hypothetical economy where: C(Ya) = 12 + 0.75 x (Y - T) • I(r) = 124 -1 x r • G = 120 • t = 20% 3. Assume that inflation is zero, so that i = r. This economy's central bank follows a given Monetary Policy Rule: r = i = 0.025 × Y +0.0003 x P , where P is the price level. Given this and the expression for the IS Curve, write down an expression for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the form P = ....)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter14: Modern Macroeconomics And Monetary Policy
Section: Chapter Questions
Problem 9CQ
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Transcribed Image Text:Consider a hypothetical economy where:
• C(Ya) = 12 + 0.75 × (Y – T)
• I(r) = 124 – 1 x r
• G = 120
• t = 20%
3. Assume that inflation is zero, so that i = r. This economy's central bank follows a
given Monetary Policy Rule:r =i= 0.025 ×Y+0.0003 × P , where P is the price
level. Given this and the expression for the IS Curve, write down an expression
for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the
form P =....)
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