'(uvuv-v-n Av \\vv luv-nun, Macroland is a closed economy and is characterized by the following equations: Consumption: C = 200 + 0.8(Y T) 500r Investment: I = 200 500r Government spending: G = 196 Taxes: T = 20 + 0.25Y Real money demand: L = 0.5Y 250i Expected ination: ITe = 0.1 Production function: Y = K1/3L2/3 Note: Interest rates, i and r, are expressed in decimal points, i.e., if r = 0.5, then r = 50%. Suppose the IS-LM model can used be to describe Macro-land, and answer the following questions. Keep your answers to a minimum of TWO decimal points (for fractions). a) Derive the IS and LM equations for this economy. (4 marks) b) The supply of capital and labour in this economy are both equal to 1000; and the level of money supply is 9890. Calculate the long-run or full-employment values of the output, consumption, investment, real interest rate, public saving, private saving, national saving, and price level. (5 marks) c) Now suppose the central bank of Macro-land undertakes open market sales (of assets). As a result, the level of money supply falls to 9200. Assuming that the economy was initially at full employment, what are the new values of output, consumption, investment, real interest rate, public saving, private saving, national saving, and price level in the short run and the long run? (5 marks) Now, instead of using the IS-LM model, the AS-AD model is used to describe Macro-land. Note: DO NOT convert aggressively round your decimal places when you are solving for the answers, please keep them in fractions with a reasonable number (two or three) of decimal places. You can report your nal answer in decimal form and with a minimum of TWO decimal places. d) Derive the AD equation. (5 marks) e) Redo part (b) using the AS-AD model. (3 marks) I) Redo part (c) using the AS-AD model