Consider an AD-AS model with AD curve Y - Y* = −αy(n − ñ*) + € and AS curveπ = π² + ¢ß(Y – Y*) + €s with parameter values a = 2, y = 1, p = 1 and ß = 2 and withinflation target * = : 0.01 and potential output normalised to Y* := 1.eTStarting from a long-run equilibrium with ² = *, suppose there is a temporary supply shock€s = 0.05. Which of the following is FALSE?In the short run, inflation is 1% above targetIn the short run, output is 2% below potentialIn the short run, the real interest rate risesO In the short run, the real interest rate falls

Consider an AD-AS model with AD curve Y - Y* = −ay(n − ñ*) + €d π = π² + ß(Y - Y*) + €s with parameter values a = 2, y = 1, p = 1 inflation target * = 0.01 and potential output normalised to Y* = : 1. Starting from a long-run equilibrium with ² = *, suppose there is a temp €s = 0.05. Which of the following is FALSE? In the short run inflation is 1% above target

Consider an AD-AS model with AD curve Y - Y* = −ay(n − ñ) + €d π = π² + ß(Y - Y) + €s with parameter values a = 2, y = 1, p = 1 inflation target * = 0.01 and potential output normalised to Y* = : 1. Starting from a long-run equilibrium with ² = *, suppose there is a temp €s = 0.05. Which of the following is FALSE? In the short run inflation is 1% above target

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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