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please do fast!! I will rate you good for sure!! Problem 2 (42p): Consider an economy with sticky prices in the short run. Prices adjust

please do fast!! I will rate you good for sure!!

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Problem 2 (42p): Consider an economy with sticky prices in the short run. Prices adjust in the longer run. Initially output equals potential output. Initially, money growth is 1%, the real interest rate is 2%, and output equals potential output. Assume potential output is constant and velocity is constant in the long run. For parts (a-c), disregard any bounds on nominal interest rates. Consider the following policy change: The central bank announces that it is shifting the MP curve DOWN by two percent. (That is, r in the equation r = F + ). It decreases by 0.02.) Assume the policy change is unexpected and permanent. Problem 2 continued: b. (12p) Determine the long-run effects of the policy change on real output, the inflation rate, nominal interest rates, and real interest rates. Explain briefly and mark the boxes below. Impact on: Inflation rate Nominal Real Real Output Interest rate Interest rate (up/down/constant/uncertain; if possible, numerical values)

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