Question
= + ( ) + ( ) Where R= nominal interest rate, = inflation rate, = target inflation rate, = potential output, = actual output
= + ( ) + ( ) Where R= nominal interest rate, = inflation rate, = target inflation rate, = potential output, = actual output
(i) What does represent? [1 mark] (ii) If is negative, what does it mean? Explain how the central bank is likely to react if is negative and why?
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Economics
Authors: R. Glenn Hubbard
6th edition
978-0134797731, 134797736, 978-0134106243
