Assume that the monetary policy curve is given by r = 1.5 + 0.751. a. Calculate the

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Assume that the monetary policy curve is given by r = 1.5 + 0.751π.

a. Calculate the real interest rate when the inflation rate is 2%, 3%, and 4%.

b. Draw a graph of the MP curve, labeling the points from part (a).

c. Assume now that the monetary policy curve is given by r = 2.5 + 0.751π. Does the new monetary policy curve represent an autonomous tightening or loosening of monetary policy?

d. Calculate the real interest rate when the inflation rate is 2%, 3%, and 4%, and draw the new MP curve, showing the shift from part (b).

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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: Nov 03, 2017 04:06 AM

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Assume that the monetary policy curve is given by r = 1.5 + 0.751. a. Calculate the

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a When the inflation rate is 2 3 and 4 the real interest rate is ...View the full answer

The Economics of Money Banking and Financial Markets

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