Suppose the Economy Is Characterized by the Following Equations $\bar{\gamma}$

question 32

Essay

Suppose the economy is characterized by the following equations.
IS curve: r = 20.20 - 0.002Y
LM curve: M/P = Y - 250(r + π^e)
SRAS curve: Y = + 100(P - P^e)
The nominal money supply is M = 19,800,expected inflation is π^e = 0.20,and full-employment output is $\bar{\gamma}$ = 10,000.
(a)If the economy begins in general equilibrium,what are the equilibrium values of the price level,output,and the real interest rate?
(b)If the expected price level is the price level you found in part (a),what happens to the price level,output,and the real interest rate in the short run if there's an unanticipated decrease in the nominal money supply to 14,737.5? {Hint: guess some price levels that differ from the one you found in part (a)by increments of 0.25.}
(c)If the expected price level is the price level you found in part (a),what happens to the price level,output,and the real interest rate in the short run if there's an unanticipated increase in the nominal money supply to 24,937.5?

---

Definitions:

Conscious Personality

Refers to the aspects of an individual's personality that they are fully aware of, including thoughts, feelings, and behaviors that the individual recognizes as their own.

Mass Society

A concept referring to a society in which industrialization and bureaucratic expansion create a perceived gap between the individual and the collective or governmental institutions.

Contagion Theory

A theory in sociology that suggests that ideas, attitudes, and behaviors spread through populations as if they were infectious diseases.

Cultural Evolution

The study of how cultures change over time, and how cultural information is passed down through generations.