8. The micro-founded version of the sticky price model is summarized in the following equation P = EP + (1-s)a (y - Y). (a) What does the parameters mean? (b) Draw the SRAS curve when s = 0 and s = 1, respectively. Why does each case correspond to the long-run and short-run economy?

8. The micro-founded version of the sticky price model is summarized in the following equation P = EP + (1-s)a (y - Y). (a) What does the parameters mean? (b) Draw the SRAS curve when s = 0 and s = 1, respectively. Why does each case correspond to the long-run and short-run economy?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

8. The micro-founded version of the sticky price model is summarized in the following equation P = EP +
(1-s)a (Y-Y). (a) What does the parameter s mean? (b) Draw the SRAS curve when s = 0 and s = 1,
S
respectively. Why does each case correspond to the long-run and short-run economy?

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