# Answer to Question #18510 in Macroeconomics for Emily Hanson

Question #18510

yt=mt - pt- ψ(yt-y*)

mt= m(bar) + εt

yt= γ(pt- E(t-1) pt )

Where εt ~ N(0,σ_ε^2)

Where y, p and m are logs of real output, prices and the money supply respectively and εt is monetary shock.

I know how to solve a similarr model without the - ψ(yt-y*) but the addition of - ψ(yt-y*) confuse me.

I hope that I can be pointed in the correct direction so I can attempt to solve it on my own.

Thank you.

mt= m(bar) + εt

yt= γ(pt- E(t-1) pt )

Where εt ~ N(0,σ_ε^2)

Where y, p and m are logs of real output, prices and the money supply respectively and εt is monetary shock.

I know how to solve a similarr model without the - ψ(yt-y*) but the addition of - ψ(yt-y*) confuse me.

I hope that I can be pointed in the correct direction so I can attempt to solve it on my own.

Thank you.

Expert's answer

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