Suppose that the economy's long-run output level is produced according to the following production function: and that A = 5, K= 400 and L = 100. Y = AK¹/2 L¹/2 b) What is the level of output Y produced when the economy in long-run equilibrium. c) Suppose that aggregate demand in the economy is described by the following equation: M yd = kP Where M is the money supply, P is the price level and k = 1/V (velocity of money). Explain carefully where this equation is derived from and its interpretation.

Suppose that the economy's long-run output level is produced according to the following production function: and that A = 5, K= 400 and L = 100. Y = AK¹/2 L¹/2 b) What is the level of output Y produced when the economy in long-run equilibrium. c) Suppose that aggregate demand in the economy is described by the following equation: M yd = kP Where M is the money supply, P is the price level and k = 1/V (velocity of money). Explain carefully where this equation is derived from and its interpretation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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