Consider the new Keynesian Phillips curve with indexation, under the assumptions of perfect foresight and β = 1, togethe

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answerhappygod
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Consider the new Keynesian Phillips curve with indexation, under the assumptions of perfect foresight and β = 1, togethe

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Consider the new Keynesian Phillips curve withindexation, under the assumptions of perfect foresightand β = 1, together with our usual aggregate demandequation, yt = mt - pt.(a) Express pt+1 in terms of its lagged valuesand mt.(b) Consider an anticipated, permanent, one-time increasein m: mt = 0for t < 0, mt = 1for t ≥ 0. Sketch how you would find the resultingpath of pt.
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