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Question IV: The AS-AD Model [total: 15 points] Consider the following economy: Aggregate Expenditure E, = C+I, + G, + X, -M, Consumption Ct = de + beY, Investment I, = a; - b; R Inflation M= MTV Y+d, Policy Rule RI - F = m(n - 7) Government Expenditure and Trade G, = G, M, = M. X, = X Use the previous equations to answer the following questions: (a) (5 points) Derive the AD curve. 2 (b) (10 points) Assume that , = 7,-1. Suppose the economy is at its potential output equilibrium with a constant / inflation rate. Using the AS-AD model, carefully explain what happens to the economy over time if there is a one-period positive demand shock