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Consider the following stylised algebraic model of behaviour in a closed economy. 5 a0 aly, (1) i 02 a3? , (2) g go , (3)

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Consider the following stylised algebraic model of behaviour in a closed economy. 5 a0 aly, (1) i 02 a3? , (2) g go , (3) m pd b, bly b,r , (4) m 1:" mo p , (5) where an , a], a2 , :13, b0, b1 and 172 are positive parameters, and Sis savings, y is output, is investment, is the interest rate, is government spending, m p d is the demand for real money balances, and reects supply of real money balances (all variables measured in logarithms). Derive and clearly identify the IS curve, LM curve and AD curve for a closed economy using (1) (5) and the following equilibrium conditions: 5 i g, (m 10)" (m p)

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