( economic) ( macro economic ) The aggregate demand (AD) curve s modelled by the following system of three equations: y = α-α₁r + α2g+α3(e + p³ − p) + αчyƒ (1) y = ẞo + B₁(m − p) + B₂r (2) r = rf — No — N₁ (e + pf − p) − N₂y + 3y (3) where y is the log of output, r is interest rate, m is the log of money supply, g is the log of government spending, e is the log of exchange rate, p is the log of price level, and a0, a1, a2, A3, A4, Bo, B1, B2, 0, 1, 2 and 3 are positive parameters. The superscript f denotes a variable of foreign country. a) Explain the economic relationships modeled in equations (1), (2) and (3).
( economic) ( macro economic ) The aggregate demand (AD) curve s modelled by the following system of three equations: y = α-α₁r + α2g+α3(e + p³ − p) + αчyƒ (1) y = ẞo + B₁(m − p) + B₂r (2) r = rf — No — N₁ (e + pf − p) − N₂y + 3y (3) where y is the log of output, r is interest rate, m is the log of money supply, g is the log of government spending, e is the log of exchange rate, p is the log of price level, and a0, a1, a2, A3, A4, Bo, B1, B2, 0, 1, 2 and 3 are positive parameters. The superscript f denotes a variable of foreign country. a) Explain the economic relationships modeled in equations (1), (2) and (3).
Chapter19: Measuring Economic Performance
Section: Chapter Questions
Problem 12P
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Transcribed Image Text:( economic) ( macro economic )
The aggregate demand (AD) curve s modelled by the following system of three
equations:
y = α-α₁r + α2g+α3(e + p³ − p) + αчyƒ
(1)
y = ẞo + B₁(m − p) + B₂r
(2)
r = rf — No — N₁ (e + pf − p) − N₂y + 3y
(3)
where y is the log of output, r is interest rate, m is the log of money supply, g is the log
of government spending, e is the log of exchange rate, p is the log of price level, and
a0, a1, a2, A3, A4, Bo, B1, B2, 0, 1, 2 and 3 are positive parameters. The superscript f
denotes a variable of foreign country.
a) Explain the economic relationships modeled in equations (1), (2) and (3).
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