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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Consider the new Keynesian Phillips curve with indexation, equation (7.76), under the assumptions of perfect foresight and β = 1, together with our usual aggregate demand equation, yt = mt − pt.
(a) Express pt+1 in terms of its lagged values and mt.
(b) Consider an anticipated, permanent, one-time increase in m: mt = 0 for t < 0,="">t = 1 for t ≥ 0. Sketch how you would find the resulting path of pt. (Hint: Use the lag operator approach from Section 7.3.)
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