n this problem you consider a variation on our basic IS-LM model.During a typical recession many people lose their jobs and suffer a substantial income drop. During the current recession the government has made an extraordinary effort to give unemployed people additional income to replace the lost income.The exact details are complicated, but we could represent it with this consumption function:where the 0.5 is the fraction of lost income that the government replaces.

The rest of the details for the model are standard:

I = 3 - 0.5r

L = 0.5Y - r

G = 2, T = 2, M/P = 4,

i. Find the IS and LM equations for this model leaving G as an unknown. Show work for potential partial credit.

ii. What is the G multiplier for this model? Briefly explain your method for finding it.

iii. The Ec102 G multiplier waswhich would be 4 here. Why is the multiplier for this model bigger or smaller than that? Explain in words what is different here and why. (There are two different factors you should be able to identify and explain.)