Find inflation and output in long-run equilibrium

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Reference no: EM13234578

An economy's AD curve is described by the following equation:

Y = 13,400 - 20,000formula25.mml,

where Y is output and formula25.mml is inflation (measured as a decimal). Initially, the inflation rate is 0.04 (i.e., 4 percent) and potential output equals 12,000

a)Find inflation and output in short-run equilibrium.

b) Find inflation and output in long-run equilibrium.

Reference no: EM13234578

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