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Let Us Derive an Aggregate-Demand Curve Starting from Some Money

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Essay

Let us derive an aggregate-demand curve starting from some money demand and money supply equations. Assume the money-demand curve is MD=150 - 15r + Y, the price level depends on r according to the equation P = 100 - 10r, and the money supply is MS = 100. Find a relationship between the price level P and output Y and show that the relation that you have found is an aggregate demand function.


Definitions:

PYY

A hormone involved in appetite regulation, produced in the gut in response to eating.

Leptin

A hormone produced by fat cells that helps to regulate body weight by inhibiting hunger, thus acting as an appetite suppressant.

Stomach Contractions

Involuntary movements of the stomach muscles, often associated with hunger or digestion processes.

Walter Cannon

A physiologist known for his work on the fight or flight response and the concept of homeostasis in the human body.

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