An economy is described by the following equations. Assume the economy is closed (Net Exports are 0) and the assumptions of the IS-LM model hold C = 3, 000 + 0.75(Y - T) I = 50, 000 - 4000r G = 12, 000 T = 12, 000 Md P 5Y - 20000r P 500, 000 (a) The equilibrium interest rate in this economy is and equilibrium output is (b) Government spending decreases by 5,000. If the central bank does not respond, this policy will by 172,000 86,400 20,000 288,000 None of these 04000 136.800 07,500 ONone of theseAn economy is described by the following equations. Assume the economy is closed (Net Exports are 0) and the assumptions of the IS-LM model hold C = 3, 000 + 0.75(Y - T) I = 50, 000 - 4000T G = 12, 000 T - 12, 000 Md P 5Y - 20000r P 500, 000 (a) The equilibrium interest rate in this economy is and equilibrium output is (b) Government spending decreases by 5,000. If the not respond, this policy will decrease real output by None of these 0 6.2 20,000 18 4000 9.2 7.500(c) If instead the central bank had responded to the decrease in government spending by changing the money supply to keep the output constant, the same decrease in 5,000 in government spending would cause the interest rate to decrease by ONone of these 01 02 01.25 00.5 (d) Return to the original numbers, The central bank increases the money supply to 2,000,000. The new equilibrium level of output will be 0422,400 ONone of these 224,000 184,400 OB36,800(e) The central bank is concerned that output is still too high so it decreases the money supply to 1,000,000. Compared to when it had the money supply at 2,000,000, this change in the money supply will cause OA decrease in output and no change in interest rates ONone of these ONo change in output or interest rates OA decrease in output and an increase in interest rates An increase in output and a decrease in interest rates (f) The government is considering a policy where it would change spending automatically in response to changes in output. In particular, it would set spending according to the equation G = 12,000 - 0.05Y Compared to the original policy (holding G fixed at 12,000), when the government institutes the new policy, an increase in investment (for example to | = 60,000 - 4000r) will cause (hint: you should be able to answer this question without solving directly) OLess change in output OMore change in output The policy will not affect the amount output changes in response to changes in investment