Suppose the monetary policy curve is given by r = 1.5 + 0.75p, and the IS curve
Question:
Suppose the monetary policy curve is given by r = 1.5 + 0.75p, and the IS curve is Y = 13 – r.
a. Calculate an expression for the aggregate demand curve.
b. Calculate the real interest rate and aggregate output when the inflation rate is 2%, 3%, and 4%.
c. Draw graphs of the IS, MP, and AD curves, labeling the points in the appropriate graphs from part
(b) above.
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Related Book For 
Economics Of Money Banking And Financial Markets
ISBN: 9780132770248
10th Edition
Authors: Frederic S Mishkin
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