Questions info:

The following equations describe an economy:

Y = C+I+G

C = 50+0.75(Y-T)

I = 150-10r

(m/p)d = Y-50r

G =250

T =200

M = 3,000

P = 4

Questions:

1. From above list, use the relevant set of equations to drive the IS Curve on an appropriately labelled graph.

2. From the above list, use the relevant set of equations to derive the LM Curve. Graph the LM on the same graph you used in question 1.

3. What are the equilibrium level of income and the equilibrium interest rate?

4. Derive the aggregate demand formula for this economy.