Question 18 Consider an economy characterized by the AS and AD curves in the textbook. Moreover, you can assume T-1 = 7. In addition, ī = 1, 6 = 2, m = 0.5. If, at time t, the economy is hit by an aggregate demand shock ā = 0.04 (but no inflation shock), then 7, is percentage points lower than T-1- (Hint: Combine the AS and AD curves, set n1-1 = ñ and solve for T, algebraically. Use the parameter values above to calculate the change in the inflation rate, i.e. Te – Tt-1- Question 19 Now assume that 7 = 2% and = 2%. Using your answer from the previous question, you know that short-run output Ý, = percent.

Question 18 Consider an economy characterized by the AS and AD curves in the textbook. Moreover, you can assume T-1 = 7. In addition, ī = 1, 6 = 2, m = 0.5. If, at time t, the economy is hit by an aggregate demand shock ā = 0.04 (but no inflation shock), then 7, is percentage points lower than T-1- (Hint: Combine the AS and AD curves, set n1-1 = ñ and solve for T, algebraically. Use the parameter values above to calculate the change in the inflation rate, i.e. Te – Tt-1- Question 19 Now assume that 7 = 2% and = 2%. Using your answer from the previous question, you know that short-run output Ý, = percent.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section16.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 4SQP

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