(4)The following equations describe an economy (C, I, G, etc., are being measured in US$ billions and i as a percentage):

C = 500+0.7(1- )Y;

t = 0.15;

I = 700-50 ;

= 1200;

L = 0.25Y - 62.5 ;

= 900

(a)Determine the equilibrium levels of income, interest rate, investment level.

(b) What is the value of the simple Keynesian multiplier, _G [Note: No derivation required.]?

(c)Suppose there is an increase in the money supply through open market operation to 1200, assume everything else remains constant then what shall be the new equilibrium values of income and interest rate prevalent in the economy?