SOlve them all this is my last chance (a) Derive the long-run equilibrium for the dynamic AD-AS model. Assume there areno shocks to demand or supply and that inflation has stabilized.(b) Now suppose that monetary-policy has the following rulei; = Tt +p+ 0z(Tt – T}) + By (Yt – Y;)where p is greater than p, implying monetary policymakers overestimate the natu-ral rate of interest. The rest of the model is the same. Solve for the long-run equi-librium under this case. Compare your long-run equilibrium to the one obtained in(a)(c) Suppose that the central bank follows the rule used in (a), but does not satisfy theTaylor Principle so that 0, < 0. Use a graph to analyze the impact of a demandshock. Does this analysis contradict the Taylor Principle as a guideline for monetarypolicy? Suppose that the Canadian economy is governed by the following equationsY; = Y; – «(rt – p) + €;ri = i – EtTt+1T; = Et-1T; + ¢(Y; – Ýt) + v;(1)(2)(3)E+T+1 = Tt(4)i = T; +p+07(T: – Tỷ ) + Oy(Yt – Y;)(5)

AD refers to the total demand for all goods and services in an economy at a given price level and…

Answered: Suppose that the Canadian economy is…

Suppose that the Canadian economy is governed by the following equations Y₁ = Yt - a(rt-p) + Et rt = it - Etπt+1 Tut = Et_17 +¢(Y –Y) +ot Et7+1 = T 0 (X VI (1) (2) (3) (4)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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