Consider the extended AD-AS model with the augmented Phillips curve. Full-employment output is y= 300 and the aggregate demand takes the form AD = 20+ 2(M/P). The short-run supply is y= y +2(P- pe) and M = 500. Starting from the long-run equilibrium, the quantity of money is increased to M = 800. The increase is unanticipated. This means that the expected price pe is the price in the long-run equilibrium before the increase in M. What will be the equilibrium price and output in the first period in which the increase in M arises? (Hint: the root finding formula for quadratic equation ax² + bx + c = 0 is -btyb2 - 4ac ) 2a O A. P=5.63, Y=304.12 O B. P=2.60, Y=340.42 O C. P=10, Y=350 O D. P=1.45, Y=503.34

Consider the extended AD-AS model with the augmented Phillips curve. Full-employment output is y= 300 and the aggregate demand takes the form AD = 20+ 2(M/P). The short-run supply is y= y +2(P- pe) and M = 500. Starting from the long-run equilibrium, the quantity of money is increased to M = 800. The increase is unanticipated. This means that the expected price pe is the price in the long-run equilibrium before the increase in M. What will be the equilibrium price and output in the first period in which the increase in M arises? (Hint: the root finding formula for quadratic equation ax² + bx + c = 0 is -btyb2 - 4ac ) 2a O A. P=5.63, Y=304.12 O B. P=2.60, Y=340.42 O C. P=10, Y=350 O D. P=1.45, Y=503.34

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter27: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 5SQP

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