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The economy has an aggregate production function f(N)=15N-1/2 N^2, where N is labor input. Labor supply is given by N^s (W/P)=-5+3 W/P, where W is
The economy has an aggregate production function f(N)=15N-1/2 N^2, where N is labor input. Labor supply is given by N^s (W/P)=-5+3 W/P, where W is the money wage and P is the price level. Desired consumption depends on real income, Y, and can be written as C^d (Y)=10+0.7Y. Given real interest rate, r, the desired investment is I^d (r)=30-200r. The real money demand is characterized by L(Y,r)=10+Y-200r. Government spending, G, and nominal money stock, M, is given as G=0 and M=200. (c) Find an equation for the aggregate demand curve. (d) What are the equilibrium values of output, consumption, investment, the real interest rate and the price level
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