Suppose the monetary policy curve is given by r = 1.5 + 0.751(, and the IS curve

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Suppose the monetary policy curve is given by r = 1.5 + 0.751(, and the IS curve is given by Y = 13 - r.

a. Calculate an expression for the aggregate demand curve.

b. Calculate the real interest rate and aggregate output when the inflation rate is 2%, 3%, and 4%.

c. Draw graphs of the IS, MP, and AD curves, labeling the points from part (b) on the appropriate graphs.

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The Economics of Money Banking and Financial Markets

ISBN: 978-0133836790

11th edition

Authors: Frederic S. Mishkin

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Question Posted: Mar 13, 2018 08:47 AM

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Suppose the monetary policy curve is given by r = 1.5 + 0.751(, and the IS curve

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a We can find an expression for the AD curve by substituting the MP c...View the full answer

The Economics of Money Banking and Financial Markets

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