Suppose that the equation for the aggregate demand is y= 7,000 + 2,400/p. in this real business cycle model, the equation for natural real GDP is Yn = 9,000 + technology shock. The technology shocks for periods 1-6 are given below.
Period: 1 2 3 4 5 6
Technology shock: -400 -80 0 1,000 400 0
A. Calculate the points on the aggregate demand curve when the price level equals 0.75, 0.80, 1.00, 1.20, 1.25, and 1.50.
B. Compute the price level and real GDP in periods 1-6. Describe the cyclical behavior of real GDP and the price level in this real business cycle model.