ECON482 Midterm: ECON 482 UofA E482A210F
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This assignment will be marked out of 220. 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. Interest rate rule: r r t y t y t (iv) government spending rule: g g t. Y where ut and t are both mean zero independent random variables and all parameters are positive. D ty = output supplied, y = long run equilibrium output, t = the inflation rate in period t, * = the target inflation rate, ty = output demanded, tr = the real interest rate, r = the constant long run real interest rate, gt = real government spending, g = long run real government spending, Et-1 = the expectation taken knowing all t-1 period information. (5) This should be a function only of exogenous variables known in period t-1.
