14 (20 points) Consider the following closed economy: Consumption: C = 300 + 0.5(Y - T) - 50r Investment: I = 250 - 200r Government spending: G = 300 Taxes: T = 300 Real money demand: L(i, Y) = 0.5Y - 250i Expected inflation: e = 0 Money supply: MS = 5000 Production function: Y = 6K0.5L0.5 Note: Interest rates, i and r, are expressed in decimal points, i.e., if r = 0.5, then r = 50%. a) Derive the AD equation for this economy. (6 points) b) The supply of capital and labour in this economy are 400 and 100 respectively. Calculate the full-employment values of the output, real interest rate, price level, and real money balance. (4 points) c) Now suppose that there is an increase in autonomous investment such that the investment function become: I = 350 - 200r Assuming that the economy was initially at full employment, what are the new values of output, real interest rate, price level, and real money balance in the short run and the long run? (10 points)