2. The following equations describe an economy: C = 0.8(1 -t)Y t = .25 1 = 900 - 50i G = 800 L = 0.25Y - 62.5ipod and as bent merab moreaxel peoqque M/P = 500 OY8. . da -3 Suppose the interest rate, i, is measured as a percentage, i.e., if the interest rate is 5%, then i = 5. LOOS ED 00 ST a. What is the equation for the IS curve incorporating the numbers above? b. What is the equation for the LM curve incorporating the numbers above? c. What is the equilibrium level of income, Y? Slugtuo to level muhaillupe wear ant alterwv d. What is the equilibrium level of the interest rate, i?e. Graphically illustrate the equilibrium in the ISLM model above 3. Assume inflation is currently 6%, but the inflation target that the central bank has announced is only 2%. Assume the long run FFR target is 2%. Hint: Recall the Taylor rule equation a. If the economy is currently at full employment, at what level should the central bank set the nominal interest rate? b. At what level should the central bank set the nominal interest rate if the economy is 2% above potential GDP