Suppose the central bank's monetary policy sets the interest rate according to the function:

Question 2 [5 points] An economy's aggregate demand curve (the relationship between short-run equilibrium output and inflation) is described by the equation: Y = 17,000 - 11,00017, where i is the inflation rate. Initially, the inflation rate is 2 percent or Ir = 0.02. Potential output Yo equals 16,450. Note: Keep as much precision as possible during your calculations. Your final answer for inflation should be accurate to at least two decimal places and output should be accurate to the nearest whole number. a) Find inflation and output in short-run equilibrium. Inflation : 0 % Output : $ 0 b) Find inflation and output in long-run equilibrium. Inflation : 0 % Output : $ 0