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(8%)Given a macro-econometrics model y; = do + 1)t-1 + @2m; + &; where y, is real GDP, y is potential output, me is the

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(8%)Given a macro-econometrics model y; = do + 1)t-1 + @2m; + &; where y, is real GDP, y" is potential output, me is the growth rate of monetary supply and &, is an i.i.d random noise. E() = 0 . Var(,) = 0. Assume the feedback rule in monetary policy is my = do + Myt-1 which makes steady-stateE(y) = y and minimize steady-stateVar(y). Given y =100, a, = 60, a, = 0.2, a2 = 50. Please find out the optimal do and 1, in the feedback rule

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