Question: Suppose the monetary policy curve is given by r = 1.5 + 0.751(, and the IS curve is given by Y = 13 - r.

Suppose the monetary policy curve is given by r = 1.5 + 0.751(, and the IS curve is given by Y = 13 - r.

a. Calculate an expression for the aggregate demand curve.

b. Calculate the real interest rate and aggregate output when the inflation rate is 2%, 3%, and 4%.

c. Draw graphs of the IS, MP, and AD curves, labeling the points from part (b) on the appropriate graphs.

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