1 = inflation rate 5%0 P LRAS SRAS, SCARZ Pe = P1 SRASH AD1 AD 2 Yp Y LRPC SRPC1 lee monetary policy to reduce 6 AD B1 4 2 SePOT natural 2 4 U(%) unreplineft - 2 Reverse from otheron graph.\fCO Part (1) unchanged Excry thing T (96) shifts by 1.5% NO -$ 1: 150 5= =350 because sowe / lenders 6 Set rut to properly Compensated. -200 -100 100 200 300 3 400 500 600 LF Part (f) canada is more ricky people 3 NCO. NICO =0.35 pg : @ 2.5 al intal Et net x= 150 41800. 8 wIve are pig net capital out how = 250 = NX = FXs SE .Q E = 2-0 005 ( F X4) 05 : 2-0 005 ( 750) NX : 2-125 = 0-75 100 FXS -100 0 100 200 300\fuse part(by results Part (d) " (96) shells by so @ Instment AS chef, not chan Ser ( 3) caus now 210 ED NCO = 204-56 - 250 2 Al -200 -100 0 100 200 79 300 501400 500 600 LF Soills 100 NCO = 100 Part (d) E NCO = NX" NCO. 50 = NX" Nx equator 2.5 = 2-0:00 5 x50 = 1 75 2 new ycharge 1 7 98 E' 1.5 NX -100 0 Cp 100 200 300 400 FX'S E = real exchange rate 3\fParts (a). (b), & (c) Chapl 8 (@) Market for (enable Funds 59 : 100 SP - >r- 210 0/4 SIF DLF SIDr = 7-001LF MOU -760- 200 4-5 rw = 4.5% P - I' =160 = NCO* 2 -200 -100 0 100 200 20 300 4 400 500 600 LF () Disentangle SED in the merkel, for foreign- calmly Parts (a), (b), & (c) net nipple s's tchange. E Ncot Alco (6) Market for Foreign Curency Exchange 3 1.5- ex 180/es at initial (E = 15) output in 25 canada 100 - 240 et 2 in Japan $ 2600 - xx LVIs excer Net of these bakers contain the same It'm and and quantilis 4 20 VE TNX foreweju of realexchay If e = 4. 120/4 Take Efl real exchange waste = eli 05 $ 170 % 1 20 KC Py -100 200 300 400 EX'S net capital wilflow does not dogand onthe real interest rate 7 126: 183