Consider the following misperceptions model of the economy.
AD: Y = 600 + 10(M/P)
SRAS: Y = 
+ P - Pe 
Okun's Law: (Y - 
) 
/ = -2(u - 
)
Let = 750,= 0.05,M = 600,and Pe = 40.
(a)What is the price level?
(b)Suppose there is an unanticipated increase in the nominal money supply to 800.What is the short-run equilibrium level of output,the unemployment rate,and the price level?
(c)When price expectations adjust fully,what is the price level?
Definitions:
Type I Error
The incorrect rejection of a true null hypothesis, also known as a "false positive."
Type II Error
Occurs when a statistical test fails to reject a false null hypothesis, also known as a false negative.
Null Hypothesis
A hypothesis that states there is no statistical significance between the two variables in the hypothesis. It posits no effect or no difference as a default stance to be tested against.
Alternative Hypothesis
A statement that contradicts the null hypothesis and proposes that there is a statistically significant relationship between two variables.
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