Consider the following equations for an economy:

C = 300 + 0.25 (Y-T)

I = 200 + 0.25 (Y) - 1000i

G = 300

T = 100

i = .06

(a) Solve for the equilibrium value for Y.

(b) What is the policy rate in this example? Explain its meaning.

(c) Find the level of the real money supply when M/P = 3Y - 7000i

(d) if the central bank wants to change the policy rate to .04, what specific action should it take?

(e) When the policy rate equals .04. find the equilibrium values for C, I and G.

(f) Confirm that Y = C+I+G at equilibrium.