The consumption function of the economy of Macro-land is given by

= 200 + 0.75( ) The investment function is given by = 200 25.

Government purchases and taxes are both 100.

(a)Find the equation of the IS curve

(b)The money demand function in Macro-land is given by = 100

The nominal money supply M is 1,000 and the price level is 2. Find the equation of the LM curve

(c)Find the interest rate and income for which the goods and services and money markets

are simultaneously in equilibrium.

(d)Suppose the government purchases are raised from 100 to 150. What are the new equilibrium interest rate and income?

(e)Suppose that the money supply is raised from 1,000 to 1,200. What are the new equilibrium interest rate and national income?

(f)How will fiscal expansion in the country (Macro-land) affect national income, employment, interest rate, price level and real money balance under the Keynesian aggregate supply condition?