Assume the following model of the economy, with the price level fixed at 4:

C = 0.7(Y - T)

T = 1,500

I = 2,000 - 15r

G = 1,500

Y = C + I + G

Ms / P = Md / P = 0.4Y - 40r

Ms = 3,000

a.Write a formula for the IS curve, showing Y as a function of r alone.

b.Write a formula for the LM curve, showing Y as a function of r alone.

c.What are the short-run equilibrium values of Y and r?

d.Assume that T decreases by 400. By how much will Y increase in short-run equilibrium? What is the tax multiplier?