Consider an economy in which the LM and IS functions are given below. Suppose the economy is purely classical so that yt=ý (you can see in picture) Then these equations can be condensed to            LM            mt - pt = y + c2Rt + εt,        c2 < 0            IS               Rt = r + Et(pt+1 - pt) + nt For simplicity, delete εt. Then assume that the monatery authority creates money according to            MP            mt = u0 + u1t + et Assume that et and nt are white noise and find the solution for pt and then for Rt.

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