A country's Central Bank is characterised by the following Loss function (L) and Phillips Curve (PC): Loss Function: L = (₁-₂)² +0.2(π₁ - 777² Phillips Curve: TT₁=Tt-1 +2(t-Ye) Where yt is actual output at time t, ye is potential output, π and π-1 are actual inflation at time t and time t-1 respectively, and is target inflation. Given this information, select ALL the CORRECT statements: The central bank's best response to shocks that affect this economy is given by (Yt-Ye) = -0.2 (π- TTT). If inflation becomes more sensitive to changes in output, the MR becomes flatter. This central bank is unemployment averse. This Phillips curve uses adaptive expectations to form expectation on future inflation.

A country's Central Bank is characterised by the following Loss function (L) and Phillips Curve (PC): Loss Function: L = (₁-₂)² +0.2(π₁ - 777² Phillips Curve: TT₁=Tt-1 +2(t-Ye) Where yt is actual output at time t, ye is potential output, π and π-1 are actual inflation at time t and time t-1 respectively, and is target inflation. Given this information, select ALL the CORRECT statements: The central bank's best response to shocks that affect this economy is given by (Yt-Ye) = -0.2 (π- TTT). If inflation becomes more sensitive to changes in output, the MR becomes flatter. This central bank is unemployment averse. This Phillips curve uses adaptive expectations to form expectation on future inflation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3
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