Y = C + I + G C = 120 + 0.5(Y-T) I = 100 - 10i G = 50 T = 40 (M/P) d = Y - 20i (Demand for real balances) M = 600 (Money Supply) P = 2 (Price) C is consumption, I is Investment, G is Government Expenditure, Y is total income, T is taxes, i is interest. a) Use the above information and derive the IS curve. (2 marks) b) Derive the LM curve. (1 mark) c) What is the equilibrium level of interest rate? (2 marks) d) What is equilibrium level of income? (1 mark) e) Suppose there is a monetary contraction. The central bank decreases money supply to 400 (P remains unchanged). Derive the new LM relation. (2 marks) f) Calculate the effect of this monetary contraction on the interest rate. (1 mark) g) Calculate the effect of this monetary contraction on the equilibrium output