Assume that an economy is characterized by the following equations:

C = 100 + (2/3)(Y - T)

T = 600

G = 500

I = 800 - (50/3)r

Ms/P = Md/P = 0.5Y - 50r

a. Write the numerical IS curve for the economy, expressing Y as a numerical function

of G, T, and r.

b. Write the numerical LM curve for this economy, expressing r as a function of Y and

M/P.

c. Solve for the equilibrium values of Y and r, assuming P = 1.0 and M = 1,200. How

do they change when P = 2.0? Check by computing C, I, and G.

d. Write the numerical aggregate demand curve for this economy, expressing Y as a

function of G, T, and M/P.

4. Assume that initially everyone expects the price level to stay the same. Now the Federal