202_ps3_w10

202_ps3_w10 - Econ 202, Winter 2010 Problem set 3. Due:...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 202, Winter 2010 Problem set 3. Due: Tuesday February 18. 1. Using the basic short-run model of the text, what is the e/ect of a perma- nent (a) Assume the central bank does not change its policy rule and that the . Explain how the economy eventually returns to a zero output gap . (b) If the the central bank whats to prevent a ±scal expansion from hav- policy rule? 2. The basic short run model of the text book takes the form ~ Y t a b ( R t r ) t = t 1 v ~ Y t o plus a policy rule that speci±es the behavior of R t . Suppose, however, that the central bank²s policy rate R s t is related to the interest rate that appears in the IS relationship R t according to R t = R s t p , where p is a mean zero shock to the risk premium. Policy is described by
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

202_ps3_w10 - Econ 202, Winter 2010 Problem set 3. Due:...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online