Suppose the Phillips curve is and the Aggregate Demand curve is πt = πt-1+Yt + Ot 3t = at — 5(Tt – 0.02) - where at = Ot = 0 in the steady state. (a) Calculate the steady state values of output and inflation in this economy. (b) Calculate the short- and long-run responses of the economy to the following shocks (use a table to report your answers, as well as show them graphically on the AD-AS graph, as well

Suppose the Phillips curve is and the Aggregate Demand curve is πt = πt-1+Yt + Ot 3t = at — 5(Tt – 0.02) - where at = Ot = 0 in the steady state. (a) Calculate the steady state values of output and inflation in this economy. (b) Calculate the short- and long-run responses of the economy to the following shocks (use a table to report your answers, as well as show them graphically on the AD-AS graph, as well

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, And Sources Of Business Cycles

Section: Chapter Questions

Problem 4E

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