With the information above, do the following:
- Derive the AE curve. (Show all your work).
- Derive Y*. (Show all your work).
- Graph the complete model and label it completely.
- What are the four policy tools at the Government’s disposal in this model?
- How do these policy tools work? (Be sure to illustrate each process graphically and/or algebraically).
- What are the limitations of these policy tools and how do you know?