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Need help in 1 economics problem. Consider the IS-PC-MR model with adaptive expectations. Suppose that the central bank minimized the following loss function L =

Need help in 1 economics problem.

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Consider the IS-PC-MR model with adaptive expectations. Suppose that the central bank minimized the following loss function L = (Prye}: + (m arT subject to the Phillips Curve 11': = It's-I + (\"Pr ye) where ye = 4, and II: = 3. Suppose that in Time 0, in addition to ination targeting, the CB starts targeting output at yH =4+(Z/2.5). The highest level of output this economy will reach during the transition to the new equilibrium is _(a)_. In Time 2, the level of ination will be _{b)_ and the level of output will be _(c)_ .The magnitude of the ination bias will be _{d)_ percent

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