Problem
Suppose the monetary policy curve is r = 1.5 + 0.75 π and that the IS curve is Y = 13 - r.
a) Find the expression for the aggregate demand curve.
b) Calculate aggregate output when the inflation rate is 2%, 3% and 4%.
c) Plot the aggregate demand curve and identify the previous three points.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.