Business, 28.11.2019 07:31 savannahvargas512

Suppose the monetary-policy rule has the wrong natural rate of interest. that is, the central bank follows this rule: it = pit + p' + thetapi(pit - pi*t) + thetay(yt - yt) where p' does not equal p, the natural rate of interest in the equation for goods demand. the rest of the dynamic ad-as model is the same as in chapter. solve for the long-run equilibrium under this policy rule. explain in words the intuition behind your solution.

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Suppose the monetary-policy rule has the wrong natural rate of interest. that is, the central bank f...

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