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Unemployment and Inflation Assignment | Homework For You

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December 3rd, 2019

  Suppose that the economy is such that a positive monetary shock reduces unemployment. Assume that the central bank likes a reduction in unemployment but dislikes an increase in inflation. The public forecasts money growth from the government’s optimization problem.

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How are money growth and inflation determined in this context? If you so wish, you can answer this by specifying a model. What would be the implications of a commitment – i.e. a rule – binding the central bank to a future rate of money growth? Should it do so? Get Economics homework help today

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