1 Algebra of the AS-AD Model Consider We' short -un rudd seen in class yt = a, - b (r t - r) = Tt-1 + uyt + 0t F + m ( T . - T ) rt = it - Tit 1. Use zae 14 Curve and the monetary policy rule to solve for y, and n, in terms of parameters (b, m); the pes- inflation zole me_1: be inflation argol 7 and the we shocks a, bad of More explicitly derive twe oquadlung nith= form 9t = $1a, + $27 +-1 + $30+ + PATT "t = 010+ + 0271-1 +030+ + VATT whore :'n shanow? o; aw: 9; clopfail an b. v and m. 2. Use these results on tine an expression for the rea interest rate r, ir terms (at, Of, t-1, T). 3. Need find ou repression for the remiurl interest rate i, in =cris (a, Of, "-1, T)