.Problem 1 Suppose that consumption, investment , government spending taxes and disposal income are given by ..I the following equations C=100+0.5Yd |=30040r G =150 and T=100 Where r, y and Yd denote the interest rate, the lncgmeand the disposable income respectively 1. Derive the IS curve and Graph it. 2. Suppose that the government wants to finance a new higher by increasing taxes to 200 Derive the new IS curve and Graph it. Does the IS curve shift to the left or to the right. Problem 2 Suppose that the real demand for money is given by Md = 0.4 Y -50r The price level P is equal to P=5 And the Nominal Money supply is given by Ma: 1040 1. Derive the LM curve and Graph it 2. Use the IS curve derived in Problem 1 question 1 and find the equilibrium interest rate as well as the Income level equilibrium. 3. Use the IS curve derived in problem 1 question # 2 and find the new equilibrium of interest rate as well as the new equilibrium of Income . What happen to the level of interest rate and the level of income due the increase in taxes by the government ? Problem 3 Suppose that the Fed would like to cure inflation thru a contractionary monetary policy by reducing money supply from 1040 to 940. 1. Discuss what tools can the Fed use to do that 2. Find the new LM curve and m it 3. Find the new equilibrium of interest rate and the new equilibrium level of income Y using the IS curve derived in Problem 1 question# 1. 4. Discuss the repercussion of the Fed policy on the different economic variables such as consumption ,Investment, demand for money ,ggta