1)Given the following relationships for AD = C+I+G+NX, solve for Y in the basic model. Make sure to show your work.

C = $200 + 0.8YDYD = Y - TA + TR, where TA = 0.25Y and TR = $1,000

I = $800

G = $1,200

2) Using the same AD data, with the exception of Investment which is now a function of interest rates,solve for equilibrium i,Y in the IS-LM model.Again, show all work to get partial and/or full credit.

IS Data:AD =C+I+G+NXY =AD

C = $200 + 0.8YDYD = Y - TA + TR, where TA = 0.25Y and TR = $1,000

I =$800-20i

G = $1,200

LM Data:Ms =$3,500L =0.5Y -75i

3)The previous equilibrium Y was less than full employment, so policymakers have decided to use fiscal policy, increasing G from $1,200 to $1,320. Find the new equilibrium level of i and Y.Show all work.

IS Data:AD =C+I+G+NXY =AD

C = $200 + 0.8YDYD = Y - TA + TR, where TA = 0.25Y and TR = $1,000

I =$800-20i

G =$1,320

LM Data:Ms = $3500L =0.5Y -75i