A standard cycle with peaks at a growth rate of 1.1 and troughs at 0.9

during the transition from expansion into recession.

The points picked are the growth rate = 1.03 for Y1 and = 0.97 for Y2.

a. What are stock prices doing?

b. What is the effect on stock prices from the changing market interest rates?

c. What are bond prices doing?

d. How is the Cd-curve shifting?

e. Given your equation for the money market, what are goods prices P doing?

f. Give a brief explanation of the general incentives facing the agents in the setting.

g. Summarizing the full equilibrium changes in:

YCrBPPBPS