(3) [20 points] An economy is described by the following equations: AD : y = mt - Pt SRAS : yt = y +b (P - Pi) The natural logarithm of a variable is denoted in lower case. Suppose that the economy is initially at the long-run equilibrium, yo = y, and b > 0. (a) [8 points] According to the sticky-price model, the value of b depends on the fraction of firms with sticky prices. Other things being equal, if a smaller proportion of firms follows the sticky-price rule, what happens to the slope of the Phillips curve? Explain. (b) [12 points] Is money ALWAYS neutral in the short run in this economy? Illustrate graphically the short-run effect of change in money supply by central bank