Suppose the monetary policy curve is given byr = 1.5 + 0.75p, and the IS curve is given byY = 13 - r.a. Calculate an expression for the aggregate demandcurve.b. Calculate the real interest rate and aggregate outputwhen the inflation rate is 2%, 3%, and 4%.c. Draw graphs of the IS, MP, and AD curves, labelingthe points from part (b) on the appropriate graphs.
Suppose the monetary policy curve is given byr = 1.5 + 0.75p, and the IS curve is given byY = 13 - r.a. Calculate an expression for the aggregate demandcurve.b. Calculate the real interest rate and aggregate outputwhen the inflation rate is 2%, 3%, and 4%.c. Draw graphs of the IS, MP, and AD curves, labelingthe points from part (b) on the appropriate graphs.
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter14: Money And The Economy
Section: Chapter Questions
Problem 10QP
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Question
Suppose the
r = 1.5 + 0.75p, and the IS curve is given by
Y = 13 - r.
a. Calculate an expression for the aggregate demand
curve.
b. Calculate the real interest rate and aggregate output
when the inflation rate is 2%, 3%, and 4%.
c. Draw graphs of the IS, MP, and AD curves, labeling
the points from part (b) on the appropriate graphs.
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