Consider a hypothetical economy where:• C(Ya) = 12 + 0.75 × (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 agiven Monetary Policy Rule:r =i= 0.025 ×Y+0.0003 × P , where P is the pricelevel. Given this and the expression for the IS Curve, write down an expressionfor the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes theform P =....)

The IS curve depicts a relation between the real income Y and the rate of interest r. At the…

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 = ....)

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 3SQ

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