345 2012 MT with answers

The public understands the g policy change uily at

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Unformatted text preview: ds the G" . policy change "*u.ily at time t. - a. Using the three-sector con_sqmpjion=only model under flexible prices, show fully what happens in the goods, bond and money markets. Make a chart showing the direction of the effects on Y, C, r, i, B and P. Hint: Show the pure expected inflation effects first and then combine with the fficts of actual increases in the money stock. (7) b. Show the time path of the (log of) P that arises from the policy change. (2) c. Now make the Mort-run ass-uri$tion that prices are fiilly.fitgd at the time of the shock but become increasingly flexible as time passes. What different adjustments now take place in the anticipation phase? (3) d. What is the time path of the nominal interest rate under the assumptions in (c)? Provide an appropriate graph and explanation. (3) J lo h --.e',:q+,-_'.*J g)art f "t*.r "n '5e' ;"' +- i nc! e.-, '.r , "'.) *D fr-tt , .*r\r! -\r,n,r"" i .. i\ !'t.!. ' r ,,{,sr-{ ib* I t"'l i \\ cc^ '...
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This note was uploaded on 01/19/2014 for the course ECON 345 taught by Professor Sumaila during the Winter '09 term at UBC.

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