Question: Answer the following question.... 3. Dynamic AD-AS Model Suppose that the economy is governed by the following equations Yt = Yt - a(rt - p)

Answer the following question....

3. Dynamic AD-AS Model Suppose that the economy is governed by the following equations Yt = Yt - a(rt - p) + et rt = it - EtTit+1 It = Et-17+ + $( Y+ - Y+) + Ut GEWNE Ett+ 1 = It it = Tit + p + 0. ( 7t - 7# ) + by(Yt - Yt) 1. Derive the long-run equilibrium for the dynamic AD-AS model. Assume there are no shocks to demand or supply and that inflation has stabilized. Use the above equations to derive the value, and show the steps and logic in your work

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