Hi I need help answering all the parts of question 3. I really just need the answers.

3. Was Out . Consider the economy of Hicksonia. a. The consumption function is given by C = 300 + 0.6(Y - T). The investment function is I = 700 - 80r. Government purchases and taxes are both 500. For this economy, graph the IS curve for r ranging from 0 to 8 percent. b. The money demand function in Hicksonia is (M/P) = Y - 200r. The money supply M is 3,000, and the price level P is 3. Graph the LM curve for r ranging from 0 to 8 percent. c. Find the equilibrium interest rate r and equilibrium income Y. d. Suppose that government purchases increase from 500 to 700. How does the IS curve shift? What are the new equilibrium interest rate and income? e. Suppose instead that the money supply expands from 3,000 to 4,500. How does the LM curve. shift? What are the new equilibrium interest rate and income? f. With the initial values for monetary and fiscal policy, suppose the price level rises from 3 to 5. What happens? What are the new equilibrium interest rate and income? g. For the initial value of monetary and fiscal policy, derive and graph an equation for the aggregate demand curve. What happens to this aggregate demand curve if fiscal or monetary policy changes, as in parts (d) and (e)?330 | PART IV Business Cycle Theory: The Economy in the Short Run SUMMARY 1. The IS-LM model is a general theory of the balances, lowers the interest rate, and stimulates aggregate demand for goods and services. The investment spending, thereby raising equilibrium exogenous variables in the model are fiscal policy, income. monetary policy, and the price level. The model 4. Expansionary fiscal policy-an increase explains two endogenous variables: the interest in government purchases or a decrease in rate and national income. taxes-shifts the IS curve to the right. This shift 2. The IS curve represents the negative relationship in the IS curve increases the interest rate and between the interest rate and income that arises income. The increase in income represents a from equilibrium in the market for goods and rightward shift in the aggregate demand curve. services. The LM curve represents the positive Similarly, contractionary fiscal policy shifts the relationship between the interest rate and income IS curve to the left, lowers the interest rate and that arises from equilibrium in the market for income, and shifts the aggregate demand curve real money balances. Equilibrium in the IS-LM to the left. model-the intersection of the IS and LM 5. Expansionary monetary policy shifts the LM curves--represents simultaneous equilibrium curve downward. This shift in the LM curve in the market for goods and services and in the lowers the interest rate and raises income. The market for real money balances. increase in income represents a rightward 3. The aggregate demand curve summarizes the shift of the aggregate demand curve. Similarly, results from the IS-LM model by showing contractionary monetary policy shifts the LM equilibrium income at any given price level. curve upward, raises the interest rate, lowers The aggregate demand curve slopes downward income, and shifts the aggregate demand curve because a lower price level increases real money to the left. KEY CONCEPTS