10. An economy is described by the following equations: LO 11.1 HARD

Suppose also that the central bank’s policy reaction function is the same as in Problem 9 above. a)Find an equation relating planned spending to output and real interest rate. b)Construct a table showing the relationship between short-run equilibrium output and inflation, for inflation rates between 0 and 4 per cent. Using this table, graph the AD curve for the economy. c)Repeat parts (a) and (b), assuming that government purchases have increased to 2 100. How does an increase in government purchases affect the AD curve?