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26 May 2018
Aggregate Supply: Yst = α + βrt + ηt
Aggregate Demand: Cdt = γ - δrt + θMt
Money Demand: Mdt = pt [Ïpt + ÏYt - Ïrt + εt]
Money Supply: Mst = Mt
Begin by assuming that θ = 0 and Ï = 0.
Prove the existence of the Classical Dichotomy mathematically. Consider (separately) the effects of changes in each of η, ε, and M.
Aggregate Supply: Yst = α + βrt + ηt
Aggregate Demand: Cdt = γ - δrt + θMt
Money Demand: Mdt = pt [Ïpt + ÏYt - Ïrt + εt]
Money Supply: Mst = Mt
Begin by assuming that θ = 0 and Ï = 0.
Prove the existence of the Classical Dichotomy mathematically. Consider (separately) the effects of changes in each of η, ε, and M.
Elin HesselLv2
27 May 2018
