Question: 2. (13 points) Now assume that commencing at time t = 1, the Australian central bank announces an immediate increase to the (continuous) growth rate

 2. (13 points) Now assume that commencing at time t =

1, the Australian central bank announces an immediate increase to the (continuous)

2. (13 points) Now assume that commencing at time t = 1, the Australian central bank announces an immediate increase to the (continuous) growth rate of the money supply, so that u, = 0.1 inAustralia. Prices are fully flexible. Draw four graphs (including numerical values on axes) covering the period t = 0 through t = 2 that show: a) (2 points) The Australian log money supply, InM; and b) (3 points) Australian log real money balances and nominal interest rate; and c) (2 points) The Australian log price level; and d) (2 points) The log exchange rate InS,,AUD/USD. e) (4 points) Write an intuitive explanation for why there is a discrete jump in several of these graphs

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!