Please correct answer and don't use hend raiting ( economic) ( macro economic )The aggregate demand (AD) curve s modelled by the following system of threeequations: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 logof government spending, e is the log of exchange rate, p is the log of price level, anda0, a1, a2, A3, A4, Bo, B1, B2, 0, 1, 2 and 3 are positive parameters. The superscript fdenotes a variable of foreign country.a) Explain the economic relationships modeled in equations (1), (2) and (3).

Equation (1) describes how output is influenced by interest rates, government spending, exchange…

Answered: ( economic) ( macro economic ) The…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter19: Measuring Economic Performance

Section: Chapter Questions

Problem 12P

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