Bonus. Suppose that output shocks are fully realized after multiple periods. Furthermore, assume that the natural interest rate is 0% and the Federal Reserve only cares about inflation such that the economy can be represented by the equations below. = 0.9-3-1-0.5-+₂+0.9 €-1 =2-(₁-2%) = 2% +0.1.-1 What is the half-life of an output shock? (round to two decimal places)

Bonus. Suppose that output shocks are fully realized after multiple periods. Furthermore, assume that the natural interest rate is 0% and the Federal Reserve only cares about inflation such that the economy can be represented by the equations below. = 0.9-3-1-0.5-+₂+0.9 €-1 =2-(₁-2%) = 2% +0.1.-1 What is the half-life of an output shock? (round to two decimal places)

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Question

Bonus. Suppose that output shocks are fully realized after multiple periods. Furthermore, assume that the natural
interest rate is 0% and the Federal Reserve only cares about inflation such that the economy can be represented by
the equations below.
5, = 0.9 - - - 0.5 - r +e,, + 0.9 E-1
7 = 2. (, - 2%)
*, = 2% + 0.1 - j-
What is the half-life of an output shock? (round to two decimal places)

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