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Part B (20 points): The lS-LM Model Please note that you may only attempt Part B once in Canvas For all the questions in part
Part B (20 points): The lS-LM Model Please note that you may only attempt Part B once in Canvas For all the questions in part B, consider the following IS-LIVI model: Goods M a rket: C=200+0.25(YT) I=150+0.25Y1000r G=250;T=200 Money Market: The questions for Part B are as follows: (1. Enter your name, and the name of anyone else you worked with on this assignment.) 2. Derive the IS relation. 3. Derive the LM relation. 4. Solve for the equilibrium level of output. 5. Solve for the equilibrium real interest rate. 6-7. Solve for the equilibrium values of C and | and verify that you obtained the value for Y by adding up the equilibrium values of C, | and G. Now suppose that the money supply increases to g = 1840. 8 -9. Solve for Y, r, C and | and describe in words the effects of a monetary expansion. M Now set ? equal to its initial value of 1600. Suppose instead that the government increases spending to G = 400. 1011. Solve for Y, C, | and r and then summarize the effects of fiscal policy on these variables using words
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