8.)Consider a closed economy with the following descriptive features:

***The Goods-and Services Market:

Aggregate Consumption Spending:C(Yd) = 100 + .7Yd,

-where:Yd= (Y- T)

Planned Investment Spending:I(r) = 100 - 50r

Tax Revenue:T = $125 billion

Exogenous Government Spending (fiscal authorities):G = $220 billion

Equilibrium in a Closed Goods-and-Services Market:

Y = C(Y-T) + I(r) + G

Money demanded:(=L (r, Y)=.2Y - 25r

Money Supplied (monetary authorities):m1=1,140 billion

Aggregate Price Level:p=2

Equilibrium in the Money Market:

(m/p)^S=L(r,Y)

i.)Derive theISandLMfunctions/curves. Also, identify and interpret the current marginal propensity to consume (MPC) from this example's Keynesian aggregate consumption function.

ii.)Find equilibrium aggregate output/income (Y*) and the equilibriumrealinterest rate(r*).

iii.)Graph your resultsand make a short additional note articulating whether this example's government is currently running a:budget deficit,budget surplus, or a balanced budget.

iv.) Now, let's say the fiscal authorities increase government spending by$125 billionto$345 billion, overall. Derive the newISfunction/curve, new equilibrium output/income (Y*), and the new equilibriumrealinterest rate(r*).And, again, given that there was a slight expansionary fiscal change implemented-with respect to government spending levels-make another updated note articulating, again, whether the government isnowrunning a:budget deficit,budget surplus, or abalanced budget.

v.) Finally, additionally, graph these new results juxtaposing them to your previous, original IS/LM graphical framework from part iii), previously, when overall government spending levels were still at a mere$220 billion.