Reread the aggregate demand shock example (event 3) in Section 13 5 Suppose the parameters of the AS and AD curves take the following values 2 , 1 2, 1, 1 2, and 3 Solve for the value of short run output and the inflation rate for the first 3 years after the shock For this problem, assume the aggre...

Again here are 10 years assuming stays at 2 percent the ...

Reread the aggregate demand shock example (event #3) in Section 13.5. Suppose the parameters of the AS

Question:

Reread the aggregate demand shock example (event #3) in Section 13.5. Suppose the parameters of the AS and AD curves take the following values: ā = 2%, = 1/2, = 1, = 1/2, and =3%. Solve for the value of short-run output and the inflation rate for the first 3 years after the shock. For this problem, assume the aggregate demand shock lasts for more than 3 years. Comment on your results.