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Calculating real GDP, the price level, the inflation rate also real money stock.

Suppose an economy has the following aggregate demand curve

Y=3401+ 2.888 M/P also a price adjustment schedule
II = 1.2[(Yt- i - Y*)/Y*]

Where Y* is potential real output= 6000, M= money suppy=900

(a)Plot the aggregate demand curve also potential GDP line.

(b)If Po= 0.5 Illustrate what is Yo? Does this place upward or downward pressure on prices? Elucidate.

(c) Compute the path of the economy, which is , Compute real GDP, the price level, the inflation rate also real money stock for every yr until GDP I s within 1% of the potential. (Limit Computed values to 10 decimals points)

Business Economics, Economics

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