Use the Following to Answer Questions :
Equation: Monetary Policy $\pi$

question 28

Multiple Choice

Use the following to answer questions :
Equation: Monetary Policy Rule
i_t = $\pi$ _t + $\rho$ + $\theta$ _$\pi$ ( $\pi$ _t - $\pi$ *_t) + $\theta$ _Y(Y_t - $\bar { Y } _ { t }$ )
-(Equation: Monetary Policy Rule) Given the monetary policy rule of the dynamic model of aggregate demand and aggregate supply, if the inflation rate increases by 1 percentage point, by how much does the nominal interest increase:

• A) 1
• B) 1 + \(\rho\)
• C) 1 + \(\theta\) _\(\pi\)
• D) \(1 + \theta _ { \pi } \left( 1 - \pi _ { \mathrm { t } } { } ^ { * } \right)\)

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