Consider the new Keynesian Phillips curve with indexation, under the assumptions of perfect foresight and β = 1, togethe
Posted: Wed Jul 06, 2022 6:29 pm
Consider the new Keynesian Phillips curve with indexation, 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, mt = 1 for t ≥ 0. Sketch how you would find the resulting path of pt.