Question

g a Q5. Stabilization policy (20) Considering two type of the social loss (SL) functions: A? 2 a SL =-ad (8-6 ) + 2(0-a)(3-6) (9–6) * + a î = 1 – 74*, a > 0, 0, 0, Â -0, =1- > a 1-t mºm" and SL, = (y, - y") + kr?, K>0 where y* is the efficient output. Discuss the similarity of these loss functions. What are the possible consequences when the optimal monetary policy decisions are based on these loss functions?​

Answer 1

Answer:

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