The money market for this economy is described by the equations:

(M/P) d = 0.4Y - 40r

M = 1200

P = 1

12.Derive a formula for the LM curve, showing Y as a function of r .

13.What are the short run values of Y and r ?

14.What are the short run values of Y and r if G increases by 200? What is the

multiplier? Is the value different from what you calculated for question 9? Explain

why it is different.

15.Derive a formula for the AD curve, showing Y as a function of P .