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Unformatted text preview: D – r Investment: I = 25 – 2r Government expenditure: G = 25 Disposable income: Y D = 0.5Y Money demand: M D /P= 100 + 6Y - 10r Money supply: M S = 40 100 for P > 1/30 Aggregate supply: Y = 3000P for P < 1/30 where Y is output, r is the interest rate, P is the price level. (a) Find and graph the Aggregate Demand Schedule for this economy. Is this a reasonable AD schedule for all possible prices? (b) Find the equilibrium for this economy. (c) Explain why you might describe this economy as a hybrid of a Classical and a Keynesian economy. (d) How might the aggregate supply be related to downward rigid wages? (e) What affect will expansionary fiscal and monetary policy have on the equilibrium output and inflation?...
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This note was uploaded on 03/15/2012 for the course EC 111 taught by Professor Timhatton during the Spring '12 term at Uni. Essex.
- Spring '12