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

C = 100 + 0.3(Y_D)

I = 150 + 0.2Y - 1000i

T = 100

G = 200

I policy = 0.01 (in percent 1%)

(M/P)^s= 1200

(M/P)^d= 2.Y - 4000.i

Note: You can solve the problem in two regimes of monetary policy: 1. Money targeting, where the central bank fixes the money supply; 2. Inflation targeting, where the central bank sets the level of the policy interest rate.

e. Expansionary monetary policy. Suppose that the central bank increases money supply to 1500. What is the impact of this expansionary monetary policy on the IS and LM curves? Find the new equilibrium values of output, interest rate, C and I.

f. Expansionary fiscal policy. Suppose that the government increases its spending G to 300. What is the impact of this expansionary fiscal policy on the IS and LM curves? Find the new equilibrium values of output, interest rate, C and I.