Dominique Ewing

Mathematics

21 September, 16:02

Consider the period t + 2 equilibrium under the assumption that pt + 2 e = pt + 1. If the central bank leaves the real policy rate unchanged, how does actual inflation in period t + 2 compare to inflation in period t + 1? How must the central bank change the nominal policy rate to keep the real policy rate unchanged? Continue to period t + 3. Making the same assumption about the level of expected inflation and the real policy rate, how does actual inflation in period t + 3 compare to inflation in period t + 2