We use the following terminology in this part: aggregate income Y and disposable income Yd (= Y T), consumption function C(Yd), planned investment function I(r), government spending G, and taxation T = tY where t is the marginal tax rate; 'r% denotes the real interest rate in the economy. (Note, 7' is in percentage points, e.g. 'r = 2 means the interest rate is 2%. When doing calculations, the interest rate should not simply be inserted in decimal form. For example, if r = 5 then 1(5) = 52 0.2 x 5 = 51.) Consider a hypothetical economy where: C(Yd) = 30 + 2/3 x (Y T) I(r) = 52 0.2 x r G = 160 t = 0.4 (represents 40%) 1. Using the information above, write out the planned Aggregate Expenditure equation. (Hint: Remember that this takes the form of AE = . . . .) 2. Write down an expressiOn for the Investment-Savings (I S) Curve. (Hint: First use the AE equation to nd an expression for equilibrium Y. Next, remember that the I 8 equation takes the form of r = ....) 3. Assume that inatiOn is zero, so that i = r. This economy's central bank follows a given Monetary Policy Rule: r = '11 = 0.02 x Y + 0.04 X P , where P is the price level. Given this and the expressi0n for the I 8 Curve, write down an expression for the Aggregate Demand Curve. (Hint: Remember that the AD Curve takes the form P = . . . .) 4. Suppose that the price level (P) is 50. What is the equilibrium value of aggregate income, Y? (Hint: use the AD equatiOn.) 5. What are the equilibrium values of the interest rate, r, and investment, I? (Hint: use the M PR or IS, and I (7') equations.) 6. Suppose that the level of Government expenditure increases to G' = 180. What is the equi- librium value of aggregate inc0me, Y? (Note: you will no longer" get a round number for Y.)