2. Consider the economy of Freeland, where the consumption function is given by C = 200 + 0.75(Y - T), investment function is / = 200 - 25r, G = 100, T = 100; the money demand function is (M/P) = Y - 100r, the money supply M = 1000, and the price level P = 2. (a) For this economy, derive the IS curve, and use Excel to graph the IS curve for r ranging from 0 to 15. (b) For this economy, derive the LM curve, and use Excel to graph the LM curve for r ranging from 0 to 15. (c) Find the equilibrium interest rate r and the equilibrium level of income Y. (d) Suppose the government purchases are raised from 100 to 150. How much does the IS curve shift? What are the new equilibrium interest rate and level of income?. (e) Suppose instead that the money supply is raised from 1000 to 1200. How much does the LM curve shift? What are the new equilibrium interest rate and level of income? (f) With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium interest rate and level of income? (g) Build on your algebra from parts (a) and (b) to derive an equation for the aggregate demand curve. Now use Excel to graph the aggregate demand curve. Do this for values of Y equal to 1000, 1100, 1200, etc., up to 2000. (h) Next, modify your Excel formula from part (g) to show what happens to the aggregate demand curve if fiscal policy changes as it did in part (d) (i.e., government purchases increase from 100 to 150). Use Excel to graph the new aggregate demand curve for the same values of Y as in part (g). Explain in words what happens to the aggregate demand and why. (i) Similar to the last question, show what happens to aggregate demand monetary policy changes as it did in part (e) (i.e., the money supply increases from 1000 to 1200). Again, use Excel to graph the modified aggregate demand curve for the same values of Y as in part (g). Explain in words what happens to the aggregate demand and why