3. Consider the following economy. Desired consumption Desired investment Real money demand Full-employment output Expected inflation Cd = 250 + O.S(Y - T) - 500r. Id = 250 - 500r. L = O.SY - 500i. ....... y = 1000. 'JT! = 0.

a. Suppose that T == G == 200 and that M == 7650. Find an equation describing the IS curve. Find an equation describing the LM curve. Finally, find an equation for the aggregate demand curve. What are the equilibrium values of output, consumption, investment, the real interest rate, and the price level? Assume that there are no misperceptions about the price level.

b. Suppose that T == G == 200 and that M == 9000. What is the equation for the aggregate demand curve now? What are the equilibrium values of output, consumption, investment, the real interest rate, and the pri� level? Assume that full-employment output, Y, is fixed.

c. Repeat Part

(b) for T== G == 300 and M == 7650.