Question: Consider Country A, where the Dynamic Aggregate Demand (DAD) is: Yt=(/(1+Y))(t*)+(1/(1+Y))t The potential level of output and the central bank's target for the inflation rate

Consider Country A, where the Dynamic Aggregate Demand (DAD) is:

Yt=(/(1+Y))(t*)+(1/(1+Y))t

The potential level of output and the central bank's target for the inflation rate are assumed to be constant.

All the questions below refer to the standard DAD graph in whicht is plotted on the vertical axis andYton the horizontal axis. In all the questions, assume that everything else remains unchanged.

a) an adverse demand shock t0 ... (will shift the DAD curve up/down or make it steeper/flatter) why?

b)An increase in the central bank's target for the inflation rate * will ... (shift the DAD curve up/down or make it steeper/flatter) why ?

c)An increase in the parameterY in the central bank's Monetary policy rule will ... ( shift the DAD curve up/down or make it steeper/flatter) why?

d) A change in the level of output Yt will ... (shift the DAD curve up/down or make it steeper/flatter or imply a movement along the DAD curve) why

Please explain why you pick the answer as I'm struggling to understand why it would go Up or down or even steeper or flatter. thanks

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