Question $4$

Equation $(1),(2)$ and $(3)$ represent a country's agdregate supply, demand and monetary policy function respectively.

$y_t^s={}_0+{}_1(p_t-E_{t-1}{p}_t)+u_t,E(u)=0,{}_0=y^{**}$

$y_t^d={}_0+{}_1(m_t-p_t)+{}_2{E}_{t-1}(p_{t+1}-p_t)+v_t,E(v)=0$

$m_t={}_0+{}_1{m}_{t-1}+{}_2{y}_{t-1}+e_t,E(e)=0$

Using the above equations, explain in detail the extent to which demand$-$side polices can stimulate economic growth in a new classical setting