Suppose that aggregate demand in the economy is described by the following equation: MI yd = kP Where M is the money supply, P is the price level and k = 1/V (velocity of money). Explain carefully where this equation is derived from and its interpretation.

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Dynamic aggregate demand (AD) can be derived using the quantity theory of money. Label the equation so that it accurately expresses the quantity theory of money in dynamic form growth in the money supply -+ Answer Bank unemployment growth in velocity inflation real economic growth marginal propensity to save Suppose that the velocity of money is stable, 4% real economic growth is occurring, the rate of inflation is 4%, unemployment is 5.3%, and the marginal propensity to save is 3%. By how much is the money supply growing? Enter your answer as a percentage.

The text assumes that the natural rate of interest p is a constant parameter. Suppose instead that it varies over time, so now it has to be written as pt. How would this change affect the dynamic aggregate demand and dynamic aggregate supply? How would a shock to pt affect output, inflation, the nominal interest rate, and the real interest rate?

For each of the changes below provide a narrative explanation and a graphical explanation of how the change will impact the economy's equilibrium price level and equilibrium quantity of output produced a) The federal reserve significantly increases the interest rate it pays banks for holding excess reserves. b) The government increases the income tax rate of households by 3%

Question 7 Which of the following are true about real and nominal demand? There may be more than one answer. a) A rise in the demand for real balances (Ma/P) raises equilibrium prices in the short-run. b) A drop in the demand for nominal balances (Ma) reduces equilibrium prices in the long-run. c) A change in government purchases can affect aggregate demand in the long-run. d) A change in government purchases can affect aggregate demand in the short-run.

QUESTION 2. Consider the following equations: MP Curve: r = 1 + 0.5 * TT IS Curve: Y = 1400 300r, Where r is the real interest rate in percentage points, Y is the real GDP in billions, and it is the inflation rate in percentage points. a) Using the MP and IS curves equations, obtain the Aggregate Demand equation. Show your work.

subquestions a and b. * for a) - need to find the IS equation, also the LM equation and the equilibrium.

Based on research conducted by the Department of Economic Analysis, the government and policy advisors of an economy believe that the full employment GDP is $7500 billion, and Pe, the overall expected price level is 118. In addition, the researchers estimate that the short run aggregate supply equation is Y = Ypot + 80 (P- Pe), where Ypot is the potential level of output. In 2016, the population was 400 million, and the structure of the economy was described by the following equations for household consumption behavior and taxes received: C = 100+ 0.8DI, and T = 0.25Y where all monetary values are in billions of dollars. Government spending was fixed at $1700 billion, and firm's investment behavior was fixed at $800 billion. Trading is allowed in this economy and in 2016, trading occurred such that the trade account was balanced. That is, net exports (X-IM) was equal to zero. Question 17 of 20) Now consider that in in the following year (2017), the government decided to implement a…