Question

Assume the following model of the closed economy in the short run, with the price level...

Assume the following model of the closed economy in the short run, with the price level (P) fixed at 1.0
C= 0.5 (Y -T)
T = 1,000
I = 1,500- 250r
G = 1,500

Md/P = 0.5Y - 500r
Ms = 1,000

a) Derive the numerical aggregate demand (AD) curve for this economy, expressing Y as a function of P

b) You are the chief economic advisor in this hypothetical economy. Do you believe that fiscal policy is more potent than monetary policy? Briefly discuss

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