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Unformatted text preview: Monetary Policy Rules and Aggregate Demand ) (  = t t m r R The IS Curve ) ( ~ r R b a Y t t = The AD Curve ) ( ~  = t t m b a Y The AD Curve t Y ~ t a AD The Aggregate Supply Curve o Y t t t + + = ~ 1 t Y ~ o t + 1 AS The Steady State: = 1 t t Y ~ t AD AS The Dynamic Algebra of AD and AS o Y m b a Y t t t t t + + = = ~ ) ( ~ 1 Rearrange: [ ] [ ] o a m b m b o m b a t t t t t + + + = + + + = 1 1 1 ) ( Solve: + + + + + =  m b o a m b m b t t 1 1 1 Comparative Advantage: An Algebraic Example Northern Economy: Workers of Number orker produced/w Computers orker produced/w Apples : : : N N N L z x Southern Economy: Workers of Number orker produced/w Computers orker produced/w Apples : : : S S S L z x Autarky S S S N N N S S N N z x p z x p x w x w = = = = 2 2 2 2 2 2 2 2 2 2 2 2 S S S S S N N N N N S s S S N N N N S s S N N N z x z x c z x z x c x w c p x w c p x w a x w a = = = = = = = = = = = = Free Trade with Complete Specialization...
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This note was uploaded on 07/17/2008 for the course ECON 502.02 taught by Professor Mccafferty during the Spring '08 term at Ohio State.
 Spring '08
 McCafferty
 Monetary Policy

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