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 = ....)
Chapter16: Monetary Policy
Section16.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model
Problem 3SQ
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