Suppose the MP curve is given by r = 1+0.5π, and the IS curve is given by Y = 18 − 3r. a. Derive an expression for the AD curve. b. Suppose that λ doubles. Derive an expression for the new AD curve. c.What does your answer to part (b) imply about the relationship between a central bank’s distaste for inflation and the slope of the AD curve?

Suppose the MP curve is given by r = 1+0.5π, and the IS curve is given by Y = 18 − 3r. a. Derive an expression for the AD curve. b. Suppose that λ doubles. Derive an expression for the new AD curve. c.What does your answer to part (b) imply about the relationship between a central bank’s distaste for inflation and the slope of the AD curve?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter15: Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical

Section: Chapter Questions

Problem 13E

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