8. (Appendix lO.B) Consider the following economy. IS curve Real money demand Short-run aggregate supply r == 2.47 - 0.0004 Y. L == O.SY - SOO(r + 'W). - Y == Y + lOO(P - pe). Here, r is the real interest rate, Y is output, and P is the price level. Assume that expected inflation, 'W, is 0, nominal money - supply, M, is 88,950, and full-employment output, Y, is 6000.

a. Use the notation of Appendixes 9.B and lO.B. What are the values of the parameters aJs, �Is, aLM' �LM' lr, and b? (Hint: Solve for asset market equilibrium to obtain the coefficients of the LM equation.)

b. What is the equation of the aggregate demand curve?

c. Suppose that the expected price level, pe , is 29 .15. What are the short-run equilibrium values of the price level, P, and output, Y?

d. What are the long-run equilibrium values of the price level, P, and output, Y?