In 2013, Prussia's aggregate demand curve was determined by the equation M + 1-4%A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equationUsing this information, draw Prussia's old and new dynamic aggregate demand curves on the graphWhich of the factors could have resulted in the change irnaggregate demand seen between 2013 and 2014?13AD 2013an improvement in technologyO an increase in importsO higher consumer confidenceO a decrease in oil prices12AD 201410854324 -3 2 1 0 1 2 3 4 5 6 78 9 10Real GDP growth rate

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Asked Mar 8, 2019
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In 2013, Prussia's aggregate demand curve was determined by the equation M + 1-4%
A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation
Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph
Which of the factors could have resulted in the change irn
aggregate demand seen between 2013 and 2014?
13
AD 2013
an improvement in technology
O an increase in imports
O higher consumer confidence
O a decrease in oil prices
12
AD 2014
10
8
5
4
3
2
4 -3 2 1 0 1 2 3 4 5 6 78 9 10
Real GDP growth rate
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In 2013, Prussia's aggregate demand curve was determined by the equation M + 1-4% A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph Which of the factors could have resulted in the change irn aggregate demand seen between 2013 and 2014? 13 AD 2013 an improvement in technology O an increase in imports O higher consumer confidence O a decrease in oil prices 12 AD 2014 10 8 5 4 3 2 4 -3 2 1 0 1 2 3 4 5 6 78 9 10 Real GDP growth rate

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Expert Answer

Step 1

The quantity theory of money:

The quantity theory of money equation can be written as follows:

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Step 2

a.

2013:

According to the theory,

If M+V = 4%, then P+Y = 4%

Figure -1, shows the Prussia’s aggregate demand curve:

The combination point of real GDP and inflation is (-4%, 8%) and (4%, 0%)

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Step 3

b.

2014:

According to the theory,

If M+V = 7%, then P+Y = 7%

Figure -2, shows the Prussia’s 2014 aggregate demand curve:

The...

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