a) For each one of the following levels P = 1, 2, 3, 4 and 5 find the aggregate quantity demanded AQD according to the quantity theory. Plot for yourself the corresponding aggregate demand curve on the same diagram as the long run aggregate supply curve You need to submit the schedule of the Aggregate demand curve. What is the equilibrium price level, the equilibrium real GDP, equilibrium aggregate quantity AQS and the equilibrium aggregate quantity demanded? What is the equilibrium nominal wage? Suppose now that overline V =5 does not change but the money supply decreases to M ^ 3 = 60 . b)What is the new equilibrium price, and the new equilibrium real GDP ? What is the new equilibrium nominal wage ? What happened to the equilibrium price level P and the equilibrium nominal wage? c)) Comparing your answers to a) and b) what happened to the equilibrium real GDP, and employment?

Units of Opportunity cost of a worker Real value of Output per additiona labor in terms of units output = worker real wage required by an Maximum real wage a producer is additional worker willing to pay for an additional worke (1) (2) (3) 8 1 9 10 2 8 12 3 7 16 4 6 18 5 5 20 6 4 22 7 3 Carefully draw for yourself the demand and supply curves of labor on a diagram and n: equilibrium real wage and the equilibrium level of employment. No Need to submit the dl . each level of employment corresponds a level of real GDP given in the following table. Production Function Schedule Level of Aggregate Employment quantity supplied = real GDP ) Find the full employment real GDP, aggregate quantity supplied A08, and nominal wage