The economy of Templeta is running a Balanced Budget with G=T and is represented by the following IS and LM equations: The IS equation is based on the following equations: C = 7500 + 0.6YD YD = (Y - T) T= G = 5000 | = 6000 + 0.15Y - 25000r And the LM function is represented by the real interest rate r = 2% or 0.02 1. Given the above variables, setup the IS-LM model then calculate and graph the equilibrium level of output and interest rate. Please show the process not only the results. Considering that the above equilibrium is the Full-Employment level of output, assume that investor confidence decreases causing a reduction in autonomous investment from 6000 to 5000. 1. Given that the interest rate doesn't change, what is the new equilibrium level of output? 2. Graphically illustrate the effects of this change in the IS-LM Graph. Clearly indicate in your graph the initial and final equilibrium levels of output. 3. Can the central bank achieve Full-Employment by Monetary Policy through reducing the interest rate to zero? If not, then how far should the (negative) interest rate drop in order to achieve Full-Employment? 4. If the government wants to achieve Full-Employment by keeping interest rate at zero and combining Fiscal Policy with it to stimulate the IS, by how much government expenditures (G) need to be increased? Show the change graphically too.