C = 2500 + .25Yd

I =1600 + .35Y - 1000i

G = 2400

T = 1800

(M/P)^d = Y(1-0.4i)

i = i0 = 0.02 (= 2%)

a. Derive the IS relation. (Hint: You want an equation with Y on the left side, all else on the right.)

b. Derive the LM relation.

c. Solve for equilibrium real output. (Hint: Substitute the value for the interest rate into the IS equation and solve for output.)

d. Solve for the equilibrium real money supply. (Hint: Substitute the value you obtained for Y in [c] into the LM equation and solve for M/P.)

e. Solve for the equilibrium values of C and I and verify the value you obtained for Y by adding up C, I, and G.