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Planned aggregate expenditure in Lotusland depends on real GDP and the real interest rate according to the following equation PAE 3,000 0.8Y-2,000r. The Bank
Planned aggregate expenditure in Lotusland depends on real GDP and the real interest rate according to the following equation PAE 3,000 0.8Y-2,000r. The Bank of Lotusland, the central bank, has announced that it will set the real interest rate according to the policy reaction function found the first two columns of the table below. For the rates of inflation given, find autonomous expenditure and short-run equilibrium output in Lotusland Inflation rate, Real interest rate, r Autonomous expenditure Equilibrium output 0.00 0.02 2960 14800 0.01 0.03 2940 14700 0.02 0.04 2920 14600 0.03 0.05 2900 14500 0.04 0.06 2880 14400 Using the data above, graph the AD curve.
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