Recall that: Ep =C+ Ip + G +X-M and C = Ca + MPC (Y-T) Consider an economy with the following parameters: MPC = 0.8 T = 200 G = 200 X = 300 M = 200 Ms = 2000 Md = 0.25Y - 25r Ca = 1200-8r Ip = 660-12r Derive and clearly show the IS curve Derive and clearly show the LM curve; Find the equilibrium income and interest rate How much is invested when the economy is in equilibrium? Now consider an expansionary fiscal policy that takes G to a total of 400 Find the new equilibrium income and interest rate How much is invested when the economy is at this new equilibrium Explain what happened after the increase in G a. b. C. d. e. f. g. h.