Lecture 12: IS-LM-PC Model continued

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MIT 14.02 Principles of Macroeconomics, Spring 2023
Instructor: Ricardo J. Caballero

Prof. Cabellero continues the discussion of the IS-LM-PC Model from lecture 11.

License: Creative Commons BY-NC-SA

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Is it counter-intuitive to have no output response in the supply shock (oil shock) case when central bank does not adjust real interest rate? The firms does need to pay a higher input price. Does it mean that before the change of real interest rate, the firm can already sell the output at a higher price? Also, if the real interest rate does not change, does it mean the nominal interest rate has already increased based on a higher inflation rate?
And what exactly is the timing about the expected inflation rate? When the oil price increases, people starts to update their expected inflation rate to be higher. Then what exactly is the timing pi_e in the Phillips curve?

twchau
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wonderful course as of now, math part is bit headache .thank you MIT Expecting more course from you

rajivlochansilumula
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from where he gets these curves they are very important

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