Suppose the Fed wants to set the realinterest rate 1 percentage point lower thanthe inflation rate. Nominal interest ratescannot fall below zero.a. Graph the MP curve for inflation valuesbetween -2% and 2%.b. Graph the AD curve. Label the inflationrate at which it kinks.

Answered: st rate 1 percentage point lower…

st rate 1 percentage point lower flation rate. Nominal interest rate ot fall below zero. ph the MP curve for inflation val een -2% and 2%. aph the AD curve. Label the inflat t which it kinks.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter15: Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical

Section: Chapter Questions

Problem 17E

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