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z501372670Suppose that the economy responds to the real interest rate according to the following equation:
Yt = Y* – Y* (1.5) (it-1 – 0.025)
Potential GDP is $25 trillion; expectations are adaptive; the natural rate of unemployment is 5.5%; the 2010 inflation rate was 3.5%.
The phillips curve is:πt = πte + 0.75 (Yt-1 – Y*)/Y*
Suppose the unemployment rate in 2011 was 8.7%, what is GDP in 2011?
10 years ago
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