Question 1 Consider a hypothetical economy characterized by the following equations (all variables as dened in class). Consumption: C = 700 + 0.95Y Investment: 1:500 30i Government spending: G=50 Money demand: L(i,Y )=0.75Y * 30i Money supply: MS/PZ400 (a) What is the equation of the IS curve? (b) What is the equation for the LM curve? (c) Solve for the equilibrium values of income (Y) and interest rates (i). ((1) Assume that the government engages in expansionary scal pol icy by increasing expenditure to G = 100. Solve for the new equilibrium values of income (Y) and interest rates (i). Illustrate your answer in a graph. (e) Assume that instead of the expansionary scal policy in part ((1) above, that the Monetary Authority (The Central Bank) engages in expansionary monetary policy by increasing the money supply by 100 to MS/P = 500. Solve for the new equilibrium values of income (Y) and interest rates (i) in this case. Illustrate your answer in a graph