1) Consider an economy described by the following: C = 3.25 trillion 1 = 1.3 trillion G = 3.5 trillion T = 3.0 trillion NX - - 1.0 trillion f = 1 mpc = 0.75 d = 0.3 x = 0.1 A = 1 7 = 1 a) (5 points) Derive an expression for the IS curve and MP curve b) (5 points) Derive an expression for the aggregate demand curve. Draw three diagrams with the monetary policy curve and IS curves on top next to each other and the aggregate demand curve below (15 points for correct and completely labeled diagrams) c) (5 points) We consider two inflation rates to 'pin' down our curves. Let point A represent conditions where inflation = 1% and point B represent conditions where inflation is 2%. d) (5 points) Suppose the Fed increases . to 3. Solve for the equilibrium output and the real rate of interest and label on your diagrams as point C. Assume inflation remains at = 1% (II =1) e) (5 points) Why might the Fed increase