Consider the following numerical example of the IS-LM model:

C = 200 + 0.25Y_D

I = 150 + 0.25Y-1000i

G = 250

T = 200

i= .05

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

b.What is the level of real money supply when the interest rate is 5%? Use the

expression:

M/P= 2Y -8000i

c.Solve for the equilibrium values of C and I