Macroland is a closed economy. It can be described by the IS-LM model.

Long-run level of output: YFE = 20000

Consumption: C = 3000 + 0.8(Y - T) - 150r

Investment: I = 3000 - 350r

Government spending: G = 4000

Real money demand: L(r, Y) = 0.5Y - 600r

Note: Interest rate, r, is expressed in percentage points, i.e., if r = 7.5, then r = 7.5%. Keep your answer

to 2 decimal places if needed.

a) In the initial (long-run) equilibrium, the government of Macroland runs a budget surplus of 250 and

the level of nominal money supply is set at 34400. Find the resulting long-run equilibrium values of

real interest rate, private savings, price level, and real money balance. (5 points)