Question: Econ203 all information is provided Question 3 [6 points] Suppose the central bank's monetary policy sets the interest rate according to the function: i =

Econ203 all information is provided

Question 3 [6 points] Suppose the central bank's monetary policy sets the interest rate according to the function: i = 4 + 3(TT - IT ) with IT = 2, and aggregate expenditure is: AE = 50 + 0.4Y - 5i a) What is the equation for the ADT curve? Use 'PI' to represent ir when entering your equation. Y = b) Plot the ADIT curve in the graph below. Aggregate Demand 7.5- Inflation Rate (%) 1.5 150 175 200 Reset Real GDP

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