.ECON 3350 ' Problem Set 11 - Page 2 of 3 _ 9/23gm21 1. (80 points) Consider the model of aggregate demand presented in class. The inputs into the AD curve are the IS curve and the MP rule, as shown below 1 d :1: 15' y _ 1 mpcA" - 1 rmerl (1) MP: 1'. = +Am (2) (a) ('20 points) Algebricelly derive the AD curve as clone in class and express it: as ination (17.) as a function of output (in). (b) (20 points) Explain how the value of A affects the slope of the AD curve. (e) (20 points) Given the aggregate demand function you derived, explain why the Thylor Principle must be satised for AD to be downward sloping. I (d) (20 points) Explain how the value of A affects how much the AD curve shifts hori- zontally in response to change: in At