a. Derive the Ys curve in the classical model. b. Prove that a decline in taxes...

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a. Derive the Ys curve in the classical model. b. Prove that a decline in taxes will shift the Ns curve (in the labor market modeled in terms of the nominal wage, W). Two things happen at about the same time. First, velocity rises. Second, there is a decline in taxes. Any effect that the change in velocity has on Yd will be less than any change a decline in taxes has on Ys. Explain and diagrammatically represent what happens to P, Y, W, and N. There is a rise in P, no change in Y, a rise in W, and no change in N. Can all of this be the result of expansionary monetary policy? Explain and diagrammatically represent your answer. Do the following: a. Derive the Yd curve in the classical model b. Prove that a decline in taxes will shift the Ys curve. Suppose that the substitution effect is equal in strength to the income effect. Now suppose MPN rises. Explain and diagrammatically represent what will happen to W, N, and Y. a. Derive the Ys curve in the classical model. b. Prove that a decline in taxes will shift the Ns curve (in the labor market modeled in terms of the nominal wage, W). Two things happen at about the same time. First, velocity rises. Second, there is a decline in taxes. Any effect that the change in velocity has on Yd will be less than any change a decline in taxes has on Ys. Explain and diagrammatically represent what happens to P, Y, W, and N. There is a rise in P, no change in Y, a rise in W, and no change in N. Can all of this be the result of expansionary monetary policy? Explain and diagrammatically represent your answer. Do the following: a. Derive the Yd curve in the classical model b. Prove that a decline in taxes will shift the Ys curve. Suppose that the substitution effect is equal in strength to the income effect. Now suppose MPN rises. Explain and diagrammatically represent what will happen to W, N, and Y.

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a Deriving the Yd Curve in the Classical Model In the classical model the aggregate demand Yd is determined by the equation Yd C I G Where Yd Aggregat... View the full answer