Consider the following model of a macroeconomyC = 1000 + 0.9Y G = 0I = 700 ? 40i T = 0P = 4W M/P = 8
Consider the following model of a macroeconomyC = 1000 + 0.9Y G = 0I = 700 ? 40i T = 0P = 4W M/P = 800W/Pe = 0.05Y L(i, Y ) = 0.5Y ? 50ii) Derive the Aggregate Supply curve for this economy. (4 marks)ii) Derive the Aggregate Demand curve for this economy. (4 marks)iii) What is the “Medium Run†output for this economy? (3 marks)iv) If Pe > P would this economy be in a state of underemployment or