Suppose the supply curve is given as and that aggregate demand is given by: Y = Y* + a(P-pe) Y = B + 3(M-P) a. Suppose there has been no shock in the economy for some time and no changes in policy are expected in the near future. Find Y and P in terms of Y* and M. b. Find Y and P when i. M increases by AM unexpectedly, and then when ii. expectations have adjusted regarding the increase in the money supply. (Your answers shouldn't contain P.) c. Suppose the economy is back to long-run equilibrium with the original money supply. Suppose then that Y* increases by AY: i. Show what happens to the price level (compared to part a) using calculations. ii. Suppose that the central bank intervenes to keep the price level stable. Finds the change in the money supply in terms of AY. Has the money supply increased or decreased? iii. Illustrate (i) and (ii) on a diagram.