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Suppose the Petrick-Havlicek economy can be described by the following equations and values: Value: ( , Not sure if these are needed. Can't figure out
Suppose the Petrick-Havlicek economy can be described by the following equations and values:
Value:
( , Not sure if these are needed. Can't figure out what they mean),
; , and the nominal money supply is 1,600.
- (1,000 pts) Solve for the equation for the AD curve, and then neatly sketch this curve below (call it AD1).
- Be sure to label the diagram fully and
- Depict the point on AD1 where the Petrick-Havlicek economy is currently operating. (Consider this as point A)
- (1,000 pts) Choose one monetary policy to implement in this economy.
- State your monetary policy of choice.
- State the goal of this monetary policy.
- Solve for the new equation for the AD curve (call it AD2).
- Neatly sketch AD2 on your diagram above (on page 2).
- (1,000 pts) Choose one fiscal policy to implement in this economy. (Make sure to ignore your calculation from part b of this question)
- State your fiscal policy of choice.
- State the goal of this fiscal policy.
- Solve for the new equation for the AD curve (call it AD3).
- Neatly sketch AD3 on your diagram above (on page 4).
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