a. In an economy, policy makers want to lower the unemployment rate and raise real GDP by using monetary policy. Draw a diagram to show why this policy will ultimately result in a higher aggregate price level but no change in real GDP.

b. Assume that country XYZ has the following hypothetical data and equations: Autonomous consumption expenditure is $150 billion and the marginal propensity to save is 0.2. Investment is $450 billion, government expenditure is $400 billion, and net taxes are a constant $300 billion.

a) What is the aggregate expenditure function?

b) Calculate equilibrium expenditure and real GDP?