Question: Reread the aggregate demand shock example (event #3) in Section 13.5. Suppose the parameters of the AS and AD curves take the following values:

Reread the aggregate demand shock example (event #3) in Section 13.5. Suppose the parameters of the AS and AD curves take the following values: ā = 2%, = 1/2, = 1, = 1/2, and =3%. Solve for the value of short-run output and the inflation rate for the first 3 years after the shock. For this problem, assume the aggregate demand shock lasts for more than 3 years. Comment on your results.

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