Money market adjustment-sluggish goods market

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Set up model (5.8) on a spreadsheet and assume instantaneous money market adjustment and sluggish goods market adjustment. Establish the new equilibrium and plot the trajectory of the economy in (Y,r)- space starting from the initial equilibrium for each of the following. Treat each one separately and assume the change takes place in period 1

(i) Fall in G from 330 to 250.

(ii) Fall in Ms from 470 to 400.

Reference no: EM13948392

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