Given the numerical model based on table 13.3 e = 0.8y + 4 + 0.01(s − p)

p˙ = 0.2(e − y)

md = p + 0.5y − 0.5r md = ms = 105 bp = 0.01(s − p) + b(r − r

∗ − s˙

e

)

s˙

e = 0.2(s − s)

y = 20 r

∗ = 10

(i) If b = 0.0045 establish that the initial equilibrium is (s,p) =

(100,100).

(ii) For a rise in the money supply to ms = 110, establish that point C is represented by (s,p) = (104.54128, 100).

(iii) Confirm that the new equilibrium satisfies dp = ds = dm.