**Monetary Policy Curve Analysis:**Consider the monetary policy curve expressed as:\[ r = 1.5 + 0.75\pi \]**Tasks:**a) Calculate the real interest rate for the following inflation rates: - 2% - 3% - 4%b) Construct a graph of the monetary policy curve and mark the calculated points from part (a).**Explanation:**_For Part (a):_- Plug in the inflation rates into the equation to find the real interest rates._For Part (b):_- The graph of the monetary policy curve should display a linear relationship between the real interest rate (r) and the inflation rate ($\pi$).- Identify and label the points on the graph corresponding to the inflation rates of 2%, 3%, and 4%. The slope of the curve is determined by the coefficient of $\pi$, which is 0.75, and the y-intercept is 1.5. The resulting graph will show how the real interest rates adjust as inflation changes according to this monetary policy rule.

Given information: We have provided the monetary policy curve equation, i.e., r = 1.5 + 0.75π Note:…

Assume the monetary policy curve is given by r = 1.5 +0.75. 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).

Assume the monetary policy curve is given by r = 1.5 +0.75. 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).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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