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a ) What are the conditions that characterize the medium - run equilibrium ?" Suppose & medium - run equilibrium in an economy in a given

Hello, I need help with the questions below. i do not understand how to do them because i do not understand the concept of real policy rate, equilibrium, and inflation rate properly. if you could explain it would be really helpful. please explain in details and if possible with the explanation you can draw the graphs

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a ) What are the conditions that characterize the medium - run equilibrium ?"
Suppose & medium - run equilibrium in an economy in a given year , say 2017 where actual and
expected inflation equals 3%/}.
b ) Assume that there is a significant increase in investor and consumer confidence in 2018.
How would the IS curve shill , assuming that the central bank does not change the real policy
rate ?' With a graphical illustration compare and comment on the equilibria in 2017 and 20187
C ) Consider the year 2019 equilibrium under the assumption that Izois = Itzpig . If the central
bank does not change the real policy rate , how would actual inflation change in 2019 ?
Compare it to that in 2018? How can the central bank keep the real policy rate unchanged ?"
With the same assumption about the expected inflation and interest rate , how would actual
inflation change in 2020 7 Compare it to that in 2019 .
*) Consider the year 2019 equilibrium again but with the assumption that Itzorg = IT . If the
central bank does not change the real policy rate , how would actual inflation change in 2019 !
Compare it to that in 2018? How can the central bank keep the real policy rate unchanged ?"
With the same assumption about the expected inflation and interest rate , how would actual
inflation change in 2020 7 Compare it to that in 2019 .
e ) Compare the inflation and output outcomes in scenarios presented in ( c ) and ( d) . Which
scenario looks more realistic to you ?" Discuss .
1) Suppose year 2021 , the central bank increases the real interest rate high enough to return
the economy to back potential output and to the rate of inflation in 2017 . Explain the
differences between central bank policies under the same assumptions about expected
inflation in ( c ) and ( d ) where
where ME = It - 1 and IT{ = IT , respectively .

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$ ) Suppose the economy reaches it's medium - run equilibrium in 202= where actual and
expected inflation are equal and the actual output reaches it's natural level . And suppose that
there is a significant and permanent increase in the price of oil in 2023 . How would the PC
curve shill , assuming that the central bank does not change the real policy rate ?' Compare the
equilibrium in 2023 to the equilibrium in 2022 with a graphical illustration . What would
happen to the actual output and the level of potential output ?" What would happen to inflation ?"
What can the central bank do return the economy to the potential output ?"

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