Consider the following extended classical economy:

a. Suppose that the nominal money supply has been constant for many years at M = 2000 and is expected to remain constant forever. What are the equilibrium values of the price level P, the expected price level Pe, output Y, and the unemployment rate u?
b. Suppose that as a complete surprise the nominal money supply increases to M = 2912. What are the short-run equilibrium values of the price level P (It is a whole number), the expected price level P°, output Y, and the unemployment rate u? What are the values of cyclical unemployment and unanticipated inflation?
c. What is the slope of the expectations-augmented Phillips curve? (The slope of the expectations-augmented Phillips curve is -h in Eq. 13.1.)

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AD SRAS Okun's law Full-employment output Natural unemployment rate Y = 400 + 5(MIP). Y = P + 40(P-P"). Y = 800. = 0.08