1. Disinflation. Suppose a country's current inflation rate is 18%, Central bank wants to reduce the...
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1. Disinflation. Suppose a country's current inflation rate is 18%, Central bank wants to reduce the inflation rate to 3% in five years, in other words, a reduction of 3 percentage points per year. Given Okun's law u-u-1-0.4(gyt-3%), Phillips Curve Pr-Pt-1-- (u-6%) and nominal money growth gy-9m-p, complete the following table to derive the desired path of disinflation. year Inflation% Umemployment rate % Output growth % Nominal money growth % before 0 18 6 3 21 Years of disinflation 1 15 After 2 12 3 4 9 6 5 3 6 3 7 3 8 3 1. Disinflation. Suppose a country's current inflation rate is 18%, Central bank wants to reduce the inflation rate to 3% in five years, in other words, a reduction of 3 percentage points per year. Given Okun's law u-u-1-0.4(gyt-3%), Phillips Curve Pr-Pt-1-- (u-6%) and nominal money growth gy-9m-p, complete the following table to derive the desired path of disinflation. year Inflation% Umemployment rate % Output growth % Nominal money growth % before 0 18 6 3 21 Years of disinflation 1 15 After 2 12 3 4 9 6 5 3 6 3 7 3 8 3
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