Q: Suppose the economy is described by two equations. The first is
Suppose the economy is described by two equations. The first is the IS equation, which for simplicity we assume takes the traditional form, Yt =−rt/θ. The second is the money-market equilibrium condit...
See AnswerQ: Consider the following model. The dynamics of inflation are given by
Consider the following model. The dynamics of inflation are given by the continuous-time version of (6.23) (6.24): π(t) = λ[y(t)− y(t)], λ>0. The IS curve takes the traditional form, y(t) =− [i(t) − π...
See AnswerQ: Consider the model in equations(6.29) (6
Consider the model in equations(6.29) (6.32).Suppose, however, there are shocks to the MP equation but not the I Sequation. Thus rt =byt+uMP t ,uMP t = ρMPuMP t−1+e MP t (where −1
See AnswerQ: (a) Consider the model in equations (6.29
(a) Consider the model in equations (6.29) (6.32). Solve the model using the method of undetermined coefficients. That is, conjecture that the solution takes the form yt =AuIS t , and find the value t...
See AnswerQ: Suppose the economy is described by the model of Section 7.
Suppose the economy is described by the model of Section 7.2, except that instead of half of firms setting their prices each period, fraction f set their prices in odd periods and fraction 1− f set th...
See AnswerQ: Consider the analysis of the new Keynesian Phillips curve with indexation in
Consider the analysis of the new Keynesian Phillips curve with indexation in Section 7.7. Suppose, however, that the indexation is only partial. That is, if a firm does not have an opportunity to revi...
See AnswerQ: Consider a continuous-time version of the Mankiw Reis model.
Consider a continuous-time version of the Mankiw Reis model. Opportunities to review pricing policies follow a Poisson process with arrival rate α>0. Thus the probability that a price path set at time...
See AnswerQ: Consider the model of Section 7.8. Suppose, however
Consider the model of Section 7.8. Suppose, however, that monetary policy responds to current inflation and output: rt = φππt +φyyt +uMP t . (a) For the case of white-noise disturbances, find expressi...
See Answer
