Consider a hypothetical economy where: C(Ya) = 12 + 0.75 x (Y - T) • I(r) = 124 -1 x r • G = 120 • t = 20% 3. Assume that inflation is zero, so that i = r. This economy's central bank follows a given Monetary Policy Rule: r = i = 0.025 × Y +0.0003 x P , where P is the price level. Given this and the expression for the IS Curve, write down an expression for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the form P = ....)
Consider a hypothetical economy where: C(Ya) = 12 + 0.75 x (Y - T) • I(r) = 124 -1 x r • G = 120 • t = 20% 3. Assume that inflation is zero, so that i = r. This economy's central bank follows a given Monetary Policy Rule: r = i = 0.025 × Y +0.0003 x P , where P is the price level. Given this and the expression for the IS Curve, write down an expression for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the form P = ....)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Consider a hypothetical economy where:
• C(Ya) = 12 + 0.75 × (Y – T)
• I(r) = 124 – 1 x r
• G = 120
• t = 20%
3. Assume that inflation is zero, so that i = r. This economy's central bank follows a
given Monetary Policy Rule:r =i= 0.025 ×Y+0.0003 × P , where P is the price
level. Given this and the expression for the IS Curve, write down an expression
for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the
form P =....)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b2e65f2-c472-45bf-885c-00dffce84016%2Fc89fd1e6-d33e-455e-805b-3508abdd7698%2Ft5opq9n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a hypothetical economy where:
• C(Ya) = 12 + 0.75 × (Y – T)
• I(r) = 124 – 1 x r
• G = 120
• t = 20%
3. Assume that inflation is zero, so that i = r. This economy's central bank follows a
given Monetary Policy Rule:r =i= 0.025 ×Y+0.0003 × P , where P is the price
level. Given this and the expression for the IS Curve, write down an expression
for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the
form P =....)
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