This question uses material from Sections 9.5.2 and 9.5.4 of the Appendix. The parameters that underlie the
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This question uses material from Sections 9.5.2 and 9.5.4 of the Appendix. The parameters that underlie the economy are \(a=b=\alpha=\beta=1\), which implies that \(\lambda=0.5\). The economy is initially in equilibrium and experiences a positive inflation shock. Use the steps set out in Section 9.5 .2 to graphically derive the \(R X\) curve. [Hint: you will need pick the initial equilibrium \(r^{*}\) and use a grid to ensure accurate measurements.] What is the new \(r_{0}\) ?
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Macroeconomics Institutions Instability And The Financial System
ISBN: 9780199655793
1st Edition
Authors: Wendy Carlin, David Soskice
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