The aggregate demand curve is given by Y, = Y - 2(T - T*) + 6d,...

 

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The aggregate demand curve is given by Y, = Y - 2(T - T*) + 6d, where Y; is output at time t, Y* is potential output, n; is inflation, is inflation target, and d is the demand shock. The aggregate supply curve is given by T = T-1+4(Y, – Y*) + s, where s(t) stands for the supply shock. In period t=1, an economy that is initially in the long run equilibrium experiences a one-off supply shock s1=-27. The target inflation is 3 percent. Please fill in numbers, percentage values should be provided as numbers greater than 1. For example if inflation gap is 10 percent, you should write "10" in the blank space provided. 1. Output gap in period t=1 is equal to (2p) 2. Gap between current inflation and the target level in period t=1 is equal to (2p) 3. According to the Taylor rule, for each percentage point that inflation rises above the target, the central bank's interest rate rises by 2 percentage points. For each percentage point that real GDP rises above its natural level, the central bank's interest rate rises by 1,5 percentage points. The change in the central bank's interest rate in period t=1 will be equal to (2p) 4. In period t=2 the central bank changes its target for inflation and sets it equal to the previous period inflation rate, that is T; = T1.Output gap in period t=2 will be equal to (2p) The aggregate demand curve is given by Y, = Y - 2(T - T*) + 6d, where Y; is output at time t, Y* is potential output, n; is inflation, is inflation target, and d is the demand shock. The aggregate supply curve is given by T = T-1+4(Y, – Y*) + s, where s(t) stands for the supply shock. In period t=1, an economy that is initially in the long run equilibrium experiences a one-off supply shock s1=-27. The target inflation is 3 percent. Please fill in numbers, percentage values should be provided as numbers greater than 1. For example if inflation gap is 10 percent, you should write "10" in the blank space provided. 1. Output gap in period t=1 is equal to (2p) 2. Gap between current inflation and the target level in period t=1 is equal to (2p) 3. According to the Taylor rule, for each percentage point that inflation rises above the target, the central bank's interest rate rises by 2 percentage points. For each percentage point that real GDP rises above its natural level, the central bank's interest rate rises by 1,5 percentage points. The change in the central bank's interest rate in period t=1 will be equal to (2p) 4. In period t=2 the central bank changes its target for inflation and sets it equal to the previous period inflation rate, that is T; = T1.Output gap in period t=2 will be equal to (2p)

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