Consider an economy described by the following data:

C = $2.9 trillion

I = $2.1 trillion

G = $2.5 trillion

T = $3.1 trillion

NX = $ 0.5 trillion

f = 1.5

mpc = 0.8

d = 0.35

x = 0.2

(a) Derive an expression for the IS curve. This expression should be of the form Y = a r b. You are being tasked with finding the values for a and b. Please round the terms in your equation to the nearest decimal.

(b) What is equilibrium output when the real interest rate is equal to 0.5%? Please round your answer to the nearest decimal.

(c) Assume that there is an increase in government spending from 2.5 trillion to 2.7 trillion, and a decrease in taxation from 3.1 trillion to 1.1 trillion. What will this do to equilibrium output? Please round your answer for output to the nearest decimal