Suppose the MP curve is given by r = 2 + p, and the IS curve is given by Y = 20 - 2r.

a. Derive an expression for the AD curve, and draw a

graph labeling points at p = 0, p = 4, and p = 8.

b. Suppose that l increases to l = 2. Derive an expression

for the new AD curve, and draw the new AD

curve using the graph from part (a).

c. What does your answer to part (b) imply about the

relationship between a central bank’s distaste for

inflation and the slope of the AD curve?

Monetary policy is used by the central bank to control the liquidity of plutocrat from frugality to bering the economy to stable condition . this is done through management of intrest class and the money suppy .
Aggregateclaimis thetotalclaimofgoodsandboonsin anfrugality. Aggregateclaimis theaggregateof consumption,leaguer,administrationexpenditureand net exports.
Affectedness is the overall increase in general price place of an frugality. affectedness causes increase in the price of goods and services which decreases exports and fall in aggregate claim.

A.

Given,

MP curve equation $\mathrm{r}=2+\pi$

IS curve equation $Y=20-2r$

AD curve equation is $Y=20-2(2+\pi )$

Substitute, $$\begin{gathered} \pi =0, \\ \pi =4and \\ \pi =8 \end{gathered}$$to de

Substitute,$\pi =0,\pi =4$and $\pi =8$to determine aggregate demand.

$Y(\pi =0)=16-2\times 0=16$

$Y(\pi =4)=16-2\times 4=8$

$Y(\pi =8)=16-2\times 8=0$

Hence, the values of aggregate labors are,$16,8$and$0$ independently.
The Aggregate demand illustration shows as follows,

$X$axis represents the aggregate output

$Y$axis represents the inflation rate.

Aggregate claim arc shows the relationship between aggregate affair and affectedness rate. The aggregate claim arc shows the negative relationship which means with the ascent in affectation aggregate affair cataract.

B.

Given,

As the value of $\lambda =2$then,

MP curve equation is$\mathrm{r}=2+2\pi$

IS curve equation is$Y=20-2\mathrm{r}$

AD curve equation is$\mathrm{Y}=20-2(2+2\pi )$

$=16-4\pi$

Substitute,$\pi =0$and $\pi =4$to determine aggregate demand,

$\mathrm{Y}(\pi =0)=16-4\times 0=16$

$\mathrm{Y}(\pi =4)=16-4\times 4=0$

Hence, the values of aggregate labors are 16 and 0 apart.

In the aggregate demand curve diagram:

X axis represents the aggregate output

Y axis represents the inflation rate

Aggregate demand wind shows the association between aggregate affair and affectedness rate. The aggregate claim arc shows the negative association which means with the ascent in affectedness aggregate handiwork cascade.

In the aggregate demand curve diagram

X axis represents the aggregate output

Y axis represents the inflation rate

C.

Increase$\lambda$ inmakes advertisement wind more flatter and as the Fed cares further about the affectedness the rise in affectation makes worse effect on aggregate affair.
affectedness is the overall increase in general price position of an frugality. affectedness causes increase in the price of goods and services which decreases exports and fall in aggregate demand.