Qassume that the economy can be described by the following

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Q. "Assume that the economy can be described by the following 3 equations:
ut-ut-1=-0.4(gyt-5%) Okun's law
πt-πt-1=-(ut-4%) Phillips Curve
gyt=gmt-πt Aggregate Demand

a) Illustrate what is the natural rate of unemployment for this economy?

Assume the economy has been in equilibrium for a while also the inflation rate is 15%.

b) Illustrate what is the growth rate of output? Illustrate what is the growth rate of the money supply?

Assume authorities want to use monetary policy to reduce the inflation rate to 7% in 2 years also keep it there.

c) How many points year of excess unemployment are required to achieve that?

d) Illustrate what happens to unemployment also output growth rate in year t, t+1, t+2 also t+3?

e) Illustrate what is the rate of nominal money growth in year t, t+1, t+2, also t+3?"

Reference no: EM13355472

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