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Macroeconomics 12th Edition by Rudiger Dornbusch, Stanley Fischer ,Richard Startz
Edition 12ISBN: 978-1259070969Macroeconomics 12th Edition by Rudiger Dornbusch, Stanley Fischer ,Richard Startz
Edition 12ISBN: 978-1259070969 Exercise 12
This question relates to expectations formation in the Lucas imperfect-information model of aggregate supply.
a. If
![This question relates to expectations formation in the Lucas imperfect-information model of aggregate supply. a. If , what is the expected change in the overall price level when local prices, p i , rise to 4 times their original level [ Hint: Use equation (19).] b. If a (the slope of the local supply function) is 12 for a particular region, by how much will output increase in the region as a result of this increase in its local prices c. How would this result change if b were.25 instead of.75, and what would it mean for b to have such a small value d. What if were 1](https://d2lvgg3v3hfg70.cloudfront.net/SM2806/11eb8243_4892_774a_bcd8_57862d99bf71_SM2806_00.jpg)
, what is the expected change in the overall price level when local prices, p i , rise to 4 times their original level [ Hint: Use equation (19).]
b. If a (the slope of the "local" supply function) is 12 for a particular region, by how much will output increase in the region as a result of this increase in its local prices
c. How would this result change if b were.25 instead of.75, and what would it mean for b to have such a small value
d. What if
![This question relates to expectations formation in the Lucas imperfect-information model of aggregate supply. a. If , what is the expected change in the overall price level when local prices, p i , rise to 4 times their original level [ Hint: Use equation (19).] b. If a (the slope of the local supply function) is 12 for a particular region, by how much will output increase in the region as a result of this increase in its local prices c. How would this result change if b were.25 instead of.75, and what would it mean for b to have such a small value d. What if were 1](https://d2lvgg3v3hfg70.cloudfront.net/SM2806/11eb8243_4892_774b_bcd8_554a5df24e73_SM2806_11.jpg)
were 1
![This question relates to expectations formation in the Lucas imperfect-information model of aggregate supply. a. If , what is the expected change in the overall price level when local prices, p i , rise to 4 times their original level [ Hint: Use equation (19).] b. If a (the slope of the local supply function) is 12 for a particular region, by how much will output increase in the region as a result of this increase in its local prices c. How would this result change if b were.25 instead of.75, and what would it mean for b to have such a small value d. What if were 1](https://d2lvgg3v3hfg70.cloudfront.net/SM2806/11eb8243_4892_774c_bcd8_5993f5a54ab9_SM2806_00.jpg)
a. If
, what is the expected change in the overall price level when local prices, p i , rise to 4 times their original level [ Hint: Use equation (19).] b. If a (the slope of the "local" supply function) is 12 for a particular region, by how much will output increase in the region as a result of this increase in its local prices
c. How would this result change if b were.25 instead of.75, and what would it mean for b to have such a small value
d. What if
were 1Explanation
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Lucas imperfect-information model of agg...
Macroeconomics 12th Edition by Rudiger Dornbusch, Stanley Fischer ,Richard Startz
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