This preview shows page 1. Sign up to view the full content.
Unformatted text preview: curve (e) Find real wage, employment, output and natural level of unemployment in this economy. (f) Illustrate the solution graphically using Labor Supply / Labor Demand and Production Function diagrams Question 2 (40 Points) The following equations describe the money market of an economy: 5 , 1000 , 200 = =-= P M i Y P M S D (a) Derive the LM curve for this economy. Plot LM curve graph. Plot Aggregate Demand Graphs. Illustrate the relationship of these two graphs. (b) Suppose that the supply of money and the price level both decrease by 5%. What effects will these changes have on the LM curve? Explain your answer....
View Full Document
This note was uploaded on 04/13/2010 for the course ECO 305 taught by Professor Kisina during the Spring '08 term at SUNY Stony Brook.
- Spring '08