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SECTION B Answer all questions in the section Assume that the following equations summarize the structure of the economy. C = C a + 0

SECTION B
Answer all questions in the section
Assume that the following equations summarize the structure of the economy.
C=Ca+0.8(Y-T)
Ca=260-10r
T=200+0.2Y
(MsP)=300
(MdP)=0.025Y-25r
I=1900-40r
G=1800
Nx=700-0.14Y
a. Derive the equation for the LM curve. (3 marks)
b. Derive the equation for the IS curve. (3 marks)
c. Derive the equation for Aggregate Demand (AD) Curve. (3 marks)
d. What is the equilibrium Output (Y) and equilibrium interest rate (r).(4 marks)
e. If the money supply decreased to 290, what are the new values of equilibrium output ( Y )
and interest rate (r).(4 marks)
f. Illustrate the result of part (e.) on a graph (3 marks)
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