Suppose that the Canadian economy is governed by the following equations Y = Y, - a(r -p)+e; T: = i- E17+1 T = E-1T +(Y - Y1) + vt E1T+1 = T i = T +p+0(7 – n)+by (Yt - Y;) (1) (2) (4) (5) Since the coefficient is negative, more sensitive implies a coefficient less than-80 (e.g.,-90,-100, etc). Recall that the sacrifice ratio is computed by dividing the output lost by the amount of disinflation. (a) Derive the long-run equilibrium for the dynamic AD-AS model. Assume there are no shocks to demand or supply and that inflation has stabilized.
Suppose that the Canadian economy is governed by the following equations Y = Y, - a(r -p)+e; T: = i- E17+1 T = E-1T +(Y - Y1) + vt E1T+1 = T i = T +p+0(7 – n)+by (Yt - Y;) (1) (2) (4) (5) Since the coefficient is negative, more sensitive implies a coefficient less than-80 (e.g.,-90,-100, etc). Recall that the sacrifice ratio is computed by dividing the output lost by the amount of disinflation. (a) Derive the long-run equilibrium for the dynamic AD-AS model. Assume there are no shocks to demand or supply and that inflation has stabilized.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Please help me out with solving for the long run equilibrium for the dynamic Ad-As model. Graph the impact of the
demand shock and explain. Thanks!
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