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)What is the effect of an adverse demand shock t0 (will it shift the DAD curve up/down or make it steeper/flatter and why)?

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

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

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

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Always show respect for the other person or persons.

Self-awareness is linked to the businesss results.

1. Too reflect on self-management