3 An economys relationship between short run equilibrium output and inflation (its aggregate demand curve) is described by the equation Y 13,000 20,000 Initially, the inflation rate is 4 percent, or 0 04 Potential output Y equals 12,000 (LO2) a Find the output in short run equilibrium b Find the in...

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3. An economys relationship between short-run equilibrium output and inflation (its aggregate demand curve) is described by

Question:

3. An economy’s relationship between short-run equilibrium output and inflation (its aggregate demand curve) is described by the equation Y = 13,000 − 20,000π. Initially, the inflation rate is 4 percent, or π = 0.04. Potential output Y* equals 12,000. (LO2) a. Find the output in short-run equilibrium. b. Find the inflation rate in long-run equilibrium. Show your work.

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