C. Assume that the long-r

C. Assume that the long-r

C. Assume that the long-run aggregate supply is given Y = (2K^1/2)*(L^1/2) , while the short-run aggregate supply curve is horizontal at P = $1.0. The aggregate demand curve is Y = 5*(M/P), and money supply is M = $1,000. Assuming that the economy?s L = K = 2,500,answer the following questions:4. Now, instead of changing the aggregate demand, assume that the Fed decreases money supply from M = $1,000 to M = $400.

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