Consider the following misperceptions model of the economy.
AD: Y = 600 + 10(M/P)
SRAS: Y = + P - P^e
Okun's Law: (Y - )/ = -2(u - )
Let = 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 =

+ P - P^e
Okun's Law: (Y -

)/

= -2(u -

)
Let

= 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 = + P - P^e Okun's Law: (Y - )/ = -2(u - ) Let = 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