Consider the following model of a closed economy. denotes the inflation rate, denotes the output rate, and is the growth of money stock. Treat as exogenous. The superscript refers to an expected value. The subscripts and 1 refers to the respective time periods. Solve for steady-state inflation rate, output level and expected inflation rate. ( ) ( ) ( ) 1 1 1 1 t t t e tt t e e tt t yy m y y =+ = + = + where: , , > 0

b) Consider the following model of a closed economy. 1: denotes the inflation rate, y denotes the output rate, and m is the growth of money stock. Treat a: as exogenous. The superscript e refers to an expected value. The subscripts t and t 1 refers to the respective time periods. Solve for steady-state ination rate, output level and expected inflation rate. y, = y,_1+ a(r in) 7r. =(y. -J7)+f ": = PurH + (1 207:; where: (1,3, A > 0