2. Refer to the monetary policy curve described in Problem 1. Assume now that the monetary policy curve is given by r = 2.5 +0.75. a) Does the new monetary policy curve represent an autonomous tightening or loosening of monetary policy? b) Plot the new monetary policy curve on the graph you created in Problem 1

2. Refer to the monetary policy curve described in Problem 1. Assume now that the monetary policy curve is given by r = 2.5 +0.75. a) Does the new monetary policy curve represent an autonomous tightening or loosening of monetary policy? b) Plot the new monetary policy curve on the graph you created in Problem 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume the monetary policy curve is given by r = 1.5 +0.75π. a) Calculate the real interest rate when the inflation rate is at 2%, 3%, and 4%. b) Plot the monetary policy curve and identify the points from part (a).
Suppose the monetary policy curve is given by r = 1.5 + 0.757, and the IS curve is given by Y = 13 – r. a) Find the expression for the aggregate demand curve. b) Calculate aggregate output when the inflation rate is 2%, 3% and 4%. c) Plot the aggregate demand curve and identify the three points from part (Ъ). d) What would be the effect on the aggregate demand curve of an increase in net export? Would an increase in net exports affect the monetary policy curve? Explain why or why not.
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