Submit exactly one document with typed answers via the canvas quiz If diagrams. figures and equations are required for your answer, these can be hand written, but need to be embedd. in your document. All other parts of the answers need to be typed There is no word limit
Simply copy-pasting material from the slides.
pre-recorded videos or other module material as part of the answers will not score any points.
Vv’hile answers probably relate to the module matenal. they should be formulated as far as possible in your own words.
1 Pnce rigidities in the short and long run
(a) Give an example of a nominal ngiclity and explain why it might arise Do the same for a real rigidity. Note’ not simpty reproduce the examples given in the lecture notes and pre-recorded videos [15 Marks]
(b) In the context of the simple Model of Imperfect Competition with flexible prices (as outlined in module sli. set
2). consider a modification of the model where the agent has the following utility function where and i are parameters. C, denotes consurnption and L, hours worked
Derive the agent’s opbmality conditions (i.e. the first order conditions with respect to -; and Ci) .d provide a detailed economic interpretation [30 Marks]
(c) Discuss ho real rigidities can amplify the effects of nominal ngidittes. [35 Marks] (d) Discuss the empirical evidence about the impact of money growth on inflation and output growth_
20 Marks]
