A hypothetical country has an economy that can be described as the following (where C, I and G are

expressed in trillion rupiah, i is interest rate in percent, so that interest rate of 5 percent is written as

i = 5):

C = 0.75 (1 - t)Y

t = 0.20

I = 700 - 50i

= 500

L = 0.20Y - 50i

M/P = 500

From the above system of equations, please

a. Derive the IS curve equation.

b. Derive the LM curve equation.

c. Calculate the IS-LM equilibrium income and interest rate.

d. Calculate the fiscal policy multiplier in the IS-LM equilibrium (), and the monetary policy

multiplier in the IS-LM equilibrium (b/h).

e. Suppose the government exercises an expansive fiscal policy by increasing its spending by Rp

100 trillion, what will happen with the IS-LM equilibrium income? Calculate and explain.

f. If the central bank of the country exercises an easy monetary policy by increasing the money

supply by Rp 50 trillion, what will happen with the IS-LM equilibrium income? Calculate and

explain.