ECON482 Midterm: ECON 482 UofA E482A109
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This assignment will be marked out of 180. The maximum number of marks that can be earned on a question is given in brackets next to the question. Your answers should be concise and to the point. Show your work. parameters, where pt = price in period t, yt = output in period t, Pt = et(pt+1) + yt - + ut, Ad: and ut, vt and mt are mean zero, independent, random variables with constant variances. The economic agents forming the expectations et know all period t information as well as the structure of the model. Illustrate ad and as in a diagram with p on the vertical axis and y on the horizontal axis. Label the slopes of the two curves. (5) Note: a check of your answers to (b) and (c) is to substitute the solutions for pt, et(pt+1) and yt into as. All the terms should cancel, so you are left with zero equals zero.
