Answered step by step
Verified Expert Solution
Question
1 Approved Answer
I need a typed answer as well as soon . Only typed answer by keyboard needed . Solve urgent please I will surely give a
I need a typed answer as well as soon . Only typed answer by keyboard needed . Solve urgent please I will surely give a helpful rating for your answer if you solve fast and correctly.
problem 2 (5 points) consider the dynamic DAD/DAS model, where the economy can be described by the following equations: the dynamic aggregate demand DAD: y, = y' -6(1, - n; ) + 38, and the dynamic aggregate supply DAS: m, = 1-1 + 0.5 (yt - y' ) + It where y* denotes the potential output, it is the target inflation and or and , are respectively the demand and supply shocks. Assume that in period t the target inflation was 6 percent and the economy was in long run equilibrium. In time 1+ 1 the central bank has permanently increased the inflation target to 14 percent. A. Calculate: (a) inflation in period t+1 (b) output gap in period t+1 ()+i-y*) (c) inflation in period t+2.(3p) B. Using the DAD/DAS graph, illustrate the effects of the change in the target inflation - clearly mark the shifts of relevant curves and the equilibrium points in period t, t+1 t+2, t+3 and the long run equilibrium, after the change of the target. (2p) 142 = 14 %%Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started