The economy is in its long-run equilibrium. The rule of the central bank is i=F+ a...

 

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The economy is in its long-run equilibrium. The rule of the central bank is i₁=F+ a₁ +m(₁) + E₁+1 Imagine that originally a, = 0. Then for one period a, increases to a value greater than zero. Show in an AD AS diagram what would happen to the economy in the first period Show in an AD AS diagram what would happen to the economy in the second period under the standard assumptions of our model and assuming that a, goes back to zero Show mathematically the effects in the period of the shock. The economy is in its long-run equilibrium. The rule of the central bank is i₁=F+ a₁ +m(₁) + E₁+1 Imagine that originally a, = 0. Then for one period a, increases to a value greater than zero. Show in an AD AS diagram what would happen to the economy in the first period Show in an AD AS diagram what would happen to the economy in the second period under the standard assumptions of our model and assuming that a, goes back to zero Show mathematically the effects in the period of the shock.