1. Consider the model on page 178 stated below: Look now in the second paragraph of page 191 under Numerical Example to see how one can derive the AD curve. As its 3 rd line says, "setting the ...

1. a) In the year of the shock, the price level, being a predetermined variable, will stay at 1. Therefore, the real money supply will also stay constant and be M/P= 90011=900. To calculate the new ...