3. [8 points] Consider the following economy: C=2500+0.5(Y-T)-150r I=1300-100r T=600 G=1000 L=0.5Y-250r M=5000 P=2 Government Budget = T - G. (Expected inflation = 0) SHOW WORK for all calculations! a) Solve for the IS curve and the LM curve; show work. b) Solve for the equilibrium values of r and Y; show work. [hint: Y & rare whole numbers; note: do not multiply the solution of r by 100; simply plug the solution to r directly into the equations to solve for Y] c) Use the results from b) to solve for equilibrium C, I, and the Savings. d) Now suppose that the full-potential level of output is equal to 8000 (i.e. Y = 8000). Draw the IS- LM diagram that correctly shows the IS, LM, and FE line give the information you have calculated above (in part b) and given that the full-potential level of output is known to be 8000. Impact of a rise in Monday Supply: e) Now suppose that Ms rises to 7000. What is the impact on the equilibrium r, Y, C, and I. Calculate all, showing all work. f) Lastly, if the full-employment level of output (Y ) = 8000, did the rise in Ms (from 5000 to 7000) bring the economy back to full-potential? Briefly discuss, referring to your numerical results