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

T = 4250

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.

c) (Continued from part b) Suppose the central bank wants to lower the short-run level of output in part

(b) by 1375 via a change in the level of money supply. Find the level of money supply that would

achieve the goal. What are the new short-run equilibrium levels of output and real interest rate? (5

points)