Consider the monetary intertemporal model with investment

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Consider the monetary intertemporal model with investment. Analyze a temporary, positive TFP (z) shock and a permanent increase in Ms, respectively. How do the implications di?er? Now suppose the representative agent only observes his or her ‘big W,’ which is the multiple of the real wage (w) and the price level (P), so that W = wP. Given an increase in W, under what circumstances can the RA infer that Ms increased and not z? What assumptions on the economic behavior of households and ?rms do these circumstances require?

Reference no: EM13975060

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