Suppose in an economy PAE=5000+0.75 Y -10 000 r and the central bank acts accor...
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Suppose in an economy PAE=5000+0.75Y-10 000r and the central bank acts according to the policy reaction function set out in the table.
| Rate of inflation (p) | Real interest rate set by central bank (r) |
| 0.00 (=0%) | 0.01 (=1%) |
| 0.01 | 0.02 |
| 0.02 | 0.03 |
| 0.03 | 0.04 |
| 0.04 | 0.05 |
If inflation is 3%, the central bank will set a real interest rate of ____ % and short-run equilibrium output will equal _____.
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