Refer to the monetary policy curve described in Problem 1.

Assume now that the monetary policy curve is given by r = 2.5 + 0.75π

a) Does the new monetary policy curve represent an autonomous tightening or loosening of monetary policy?

b) Plot the new monetary policy curve on the graph you created in Problem 1.

Data from Problem 1

Assume the monetary policy curve is given by r = 1.5 + 0.75π.

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

Plot the monetary policy curve and identify the points from part (a).