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5. Consider the following numerical example of the IS-LM model: C = 100 + 0.3 YD I = 150 + 0.2Y 1000i T= 100 G=200

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5. Consider the following numerical example of the IS-LM model: C = 100 + 0.3 YD I = 150 + 0.2Y 1000i T= 100 G=200 i= .01 (M/P)' = 1200 (M/P)" = 21! 4000i a. Find the equation for aggregate demand (Y). b. Derive the IS relation. c. Derive the LM relation if the central bank sets an interest rate of 1%. d. Solve for the equilibrium values of output, interest rate, C and I . e. Expansionary monetary policy. Suppose that the central bank increases money supply to 1 500. What is the impact of this expansionary monetary policy on the IS and LM curves? Find the new equilibrium values of output, interest rate, C and I. f. Expansionary fiscal policy. Suppose that the government increases its spending G to 300. What is the impact of this expansionary scal policy on the IS and LM curves? Find the new equilibrium values of output, interest rate, C and

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