Assume that the economy is represented by the following function Y = $9 Trillion + $500 billion (P - P^e). If the current price level is 1.0 and people expect it to rise to 1.1 what will be the new level of GDP if their expectations of inflation are wrong and the actual price level rises to 1.2?

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The Answer of Assume that the economy is represented by the following function Y = $9 Trillion + $500 billion (P - P^e). If the current price level is 1.0 and people expect it to rise to 1.1 what will be the new level of GDP if their expectations of inflation are wrong and the actual price level rises to 1.2?

Assume That the Economy Is Represented by the Following Function