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( 7.(a) Using IS_LM model. Explain the analysis for the following: Use diagram where necessary. 13+2+2 Marks | When in an economy, if the interest rate does not affect investment in the goods market, then analyses the impact on the economy? Show by diagram Impact of increase in money supply in two identical economies having differences in MPCs. i.e MPC, > MPC2. Show what high MPC countries will experience. Rather than boosting, if there is drop in consumer confidence, although thereis increase in money supply. (b) The real money demand function for an economy is as | 3 Marks ] M'/P - 3000 +0.1 Y - 10,000 i where assume that M = 6000, P - 2.0, and x* = 0.02. (i). What is the real interest rate , r, that clears the asset market when Y = 8000? When Y =9000? Graph the LM curve. (ii). Repeat part (a). for M = 6600. How does the LM curve change in this case? Explain. (iii). Using M - 6000, again and repeat part (a). for * = 0.03. How does the LM curve change in this case? Explain. GOOD LUCK