Consider the following misperceptions model of the economy.
AD: Y = 600 + 10(M/P)
SRAS: Y = $\bar{\gamma}$ + P - P^e
$\bar{\gamma}$
Okun's Law: (Y - $\bar{\gamma}$ )/ $\bar{\gamma}$ = -2(u - $\bar u$ )
Let $\bar{\gamma}$ = 750,= 0.05,M = 600,and P^e = 40.
(a)What is the price level?
(b)Suppose there is an unanticipated increase in the nominal money supply to 800.What is the short-run equilibrium level of output,the unemployment rate,and the price level?
(c)When price expectations adjust fully,what is the price level?

Question

Consider the following misperceptions model of the economy.
AD: Y = 600 + 10(M/P)
SRAS: Y =

\bar{\gamma}

+ P - P^e

\bar{\gamma}

Okun's Law: (Y -

\bar{\gamma}

)/

\bar{\gamma}

= -2(u -

\bar u

)
Let

\bar{\gamma}

= 750,= 0.05,M = 600,and P^e = 40.
(a)What is the price level?
(b)Suppose there is an unanticipated increase in the nominal money supply to 800.What is the short-run equilibrium level of output,the unemployment rate,and the price level?
(c)When price expectations adjust fully,what is the price level?

Quizplus · Accepted Answer

The Answer of Consider the following misperceptions model of the economy. AD: Y = 600 + 10(M/P) SRAS: Y = $ \bar{\gamma} $ + P - P^e $ \bar{\gamma} $ Okun's Law: (Y - $ \bar{\gamma} $ )/ $ \bar{\gamma} $ = -2(u - $ \bar u $ ) Let $ \bar{\gamma} $ = 750,= 0.05,M = 600,and P^e = 40. (a)What is the price level? (b)Suppose there is an unanticipated increase in the nominal money supply to 800.What is the short-run equilibrium level of output,the unemployment rate,and the price level? (c)When price expectations adjust fully,what is the price level?

Consider the Following Misperceptions Model of the Economy γˉ \bar{\gamma} γˉ​

Consider the Following Misperceptions Model of the Economy $\bar{\gamma}$