Suppose the monetary-policy rule has the wrong natural rate of interest. That is, the central bank follows
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it = πt + p’ + θπ(πt − πt*) + θY(Yt − t)
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If the central bank has the wrong natural rate of interest then it is using a value that is different from the real value Suppose that the wrong natural rate of interest is defined as follows In this ...View the full answer
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Related Book For
Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
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