Macroeconomics

1. a) Consider a closed economy with two classes of consumers: industrial workers and agricultural workers. The former pay tax while the latter don't. The former live in cities and spend more. Therefore, their marginal propensity to consume is greater than the same of the latter. Industry generates / proportion of the GDP where 0 is the real interest rate. Derive the IS curve. If the LM curve in this economy is M - =aY - Br then derive the equilibrium output. Derive the P multiplier effect and explain. Would there be a crowding out