The assignment uses the following terminology in this part: aggregate income } and dis- posable income Ya (= Y -T), consumption function C(Ya), planned investment function I(), government spending G, and taxation 7; 7% denotes the real interest rate in the economy. (Note, " is in percentage points, e.g. " = 2 means the interest rate is 2%. When doing calculations, the interest rate should not simply be inserted in decimal form. For example, if I(r) = 104 - 1 x r and r = 10 then I(10) = 104 -1(10) = 94.) Consider a hypothetical economy where: . C(Yd) = 0+0.7 x (Y - T) . I(r) =104-1 xr . G = 270 . T = 100 1. Using the information above, write out the planned Aggregate Expenditure equa- tion. (Hint: Remember that this takes the form of AE = . ...) 2. Write down an expression for the Investment-Savings (IS) Curve. (Hint: First use the AE equation to find an expression for equilibrium Y. Next, remember that the IS equation takes the form of r = ....) 3. Assume that inflation is zero, so that i = r. This economy's central bank follows a given Monetary Policy Rule: r = = 0.003 x Y + 0.001 x P where P is the price level. Given this and the expression for the IS Curve, write down an expression for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the form P = ....) 4. Suppose that the price level (P) is 1000. What is the equilibrium value of aggregate income, Y? (Hint: use the AD equation.) 5. What are the equilibrium values of the interest rate, r, and investment, /? (Hint: use the MPR or IS, and I(r) equations.) 6. Suppose that the price level (P) falls to 500. What is the equilibrium value of aggregate income, Y