Question 1: IS-LM-AD in a closed economy (35 Marks) The following represents the key equations for a closed economy: = 12.25+0.5Y -550r Money demand P C = 21.6+0.7(Y -T)-300r Desired consumption I'=36.25-250r Desired investment Y =C +/*+G Goods market equilibrium The variables in this and the following two questions are those as described in the text and familiar to you from class. a) Write out the equations for the IS and LM curves for this economy, with the real rate of interest (r) on the left-hand side. Next, use these two relationships to find the AD curve, written with output (Y) on the left-hand side. b) Assume that G = 10 and that the level of taxation (7) is 8. If the nominal money supply (M) is 50 and the price level (P) is 1, what would be the level of Y and r in this economy? Find as well the level of C and / and verify that the components of GDP add up to the level of Y you found