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Question 1 L = =[a(n - IT *) 2 + (y - ky *)2 y = y *+ b(It - It) a. What is the
Question 1 L = =[a(n - IT *) 2 + (y - ky *)2 y = y *+ b(It - It) a. What is the expected inflation rate under commitment i.e. when central bank credibly commits to an inflation rate and promises to maintain it (7.5)? b. What is the expected loss under commitment? Can you compare it to the expected loss under discretion (7.5)
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