theory of macroeconomics

3. [8 points] Consider the following economy: C=1500+0.5(YT)-100r 1: 750-1 50r T=200 G=600 L=U.5Y250r M\": 5000 P=2 Government Budget = T G. (Expected ination = 0) W a) Solve for the IS curve and the LM curve. b) Solve for the equilibrium values of r and Y. [hint Y is a whole number; note: do not multiply the solution of r by 100; simply plug the solution to r directly as is into the equations to solve for Y] c) Use the results from b) to solve for equilibrium C, I, and the Government Budget. d) Now suppose that the full-potential level of output is equal to 5500 (Le. Y = 5500). Draw the IS- LM diagram that correctly shows the IS, LM, and FE line give the information you have calculated above (in part b) and given that the full-potential level of output is known to be 5500