Aggregate demand curve

AD_curve.R

# Aggregate demand curve 

ad.curve <- function(c, A, b, ms, h, k ,y) # We are trying to arrive at a relation between 
# Prices and output.
{
  alpha <- 1/(1-c)
  omega <- (k/h) - (1/alpha*b)
  P <- (ms/h)/(y*omega + (A/b)) # This is just basic algebra, you substitute "i" in terms of 
# "P" and "Y" from the IS and LM equations and find a relation between prices and output.
  return(P)
}

# Deriving the AD curve
ms.ad <- 10000  
ad <- ad.curve(mpc, autonomous.component , b, ms.ad, h, k ,y.is)
plot(y.is, ad, type="l",xlim = c(180,205), ylim = c(37.68,38.05), 
main = "Aggregate demand curve", xlab = "Output(Y)",
ylab = "Prices(P)", col = "royalblue")