Question 3 Consider an economy in which the following relationships hold: Consumption Function: C = 220 + 0.3[1' T} Investment Spending: I = 15!] -| H.251" 1% Government Spending: G = 4013 Taxes: '1" = 253 Nominal Interest Rate: i = [1.325 Money Demand Function: Md = BY 3333i Assume that the price level is xed. {a} {4 points] Calculate and interpret the slope of the IS curve in this economy. {hi {3 points} Solve for the equilibrium output. Show each step. {cl {3 points] At the equilibrium output, show that total saving is equal to investment. {d} {3 points] Now suppose that people expect economic conditions to worsen and the autonomous consumption falls from 22!] to 193 units. Calculate the nal impact on aggregate private saving in the economy. Show your 1artwork. {e} {3 points] Explain why the impact you calculated in (d) is a paradox? {f} {4 points] If the Central Bank decides to change the nominal internmt rate, cal- culate the new interest rate that is required to bring output back to the original equilibrium. Show your 1Ilatnrlr. {g} {5 points] 1what would eventually happen to Money Demand in the economy if the Central Bank tried to achieve the interest rate that you calculated in {h}? Explain. {h} {4 points] Suppme that the Central Bank changes the nominal interest rate to the maximum extent possible after the change in autonomous consumption. Explain the full process by which the Central Bank would achieve this. {i} {3 points] If people hold a fraction [LS of their money as currency and the Central Bank's required reserve ratio 'E [L], calculate and interpret the money multiplier in the economy. {j} {5 points] After the change in autonomous consumption and the monetary policy change1 calculate the nal effects on different components of aggregate demand [C, I, C]. I want you to compare each component [alter all changes. in the economy] with the original scenario in the economy and explain the changes