Price level targeting: (1-7) Pe+YPO + (1+ yt) 12' 1 2π* Inflation averaging: (1) S Pt+Pt-s+12 where pt is the natural log of the price level and the long-run inflation target. (a) For a given period, t, for what values of y and s are the price level targets from these two rules the same? (b) Rewrite the price level targets above as inflation targets by subtracting the log of the price level in the same period of the previous year. (1) (2)

Price level targeting: (1-7) Pe+YPO + (1+ yt) 12' 1 2π* Inflation averaging: (1) S Pt+Pt-s+12 where pt is the natural log of the price level and the long-run inflation target. (a) For a given period, t, for what values of y and s are the price level targets from these two rules the same? (b) Rewrite the price level targets above as inflation targets by subtracting the log of the price level in the same period of the previous year. (1) (2)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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