Suppose that the IS curve of an economy can be written as Y=21-2r, and the monetary policy is described by the following MP curve: The aggregate supply is r=1+0.5. π = π²+(Y-16)
Suppose that the IS curve of an economy can be written as Y=21-2r, and the monetary policy is described by the following MP curve: The aggregate supply is r=1+0.5. π = π²+(Y-16)
Chapter26: Monetary Policy
Section: Chapter Questions
Problem 11SQP
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Suppose that a permanent change in government spending shift the AD curve to the right by 3. Calculate interest rate, inflation, and output in the new longrun equilibrium.
Transcribed Image Text:Suppose that the IS curve of an economy can be written as
Y=21-2r,
and the monetary policy is described by the following MP
curve:
The aggregate supply is
r=1+0.5л.
π = π²+(Y-16)
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