Present a model with rational expectations and the Friedman–Lucas supply function. If policy makers and the public have the same information, can stabilization policies in a stochastic context change aggregate demand and output (i) in the short run, (ii) in the long run?
(i) Present a model with rational expectations and the Friedman–Lucas supply function. If policy makers and the public have the same information, can stabilization policies in a stochastic context change aggregate demand and output (i) in the short run, (ii) in the long run?
(ii) Present a model with rational expectations and the new Keynesian supply function. If policy makers and the public have the same information, can stabilization policies in a stochastic context affect aggregate demand and output (i) in the short run, (ii) in the long run?
(iii) Why do models with rational expectations have difficulty in explaining the persistence of output from its trend and
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