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Y5 C = 500 + 0.75(Y-T) P = 2 I = 100 - 50r (M/P)^D = y - 200r G = 1000 T = 1000
Y5
C = 500 + 0.75(Y-T)
P = 2
I = 100 - 50r
(M/P)^D = y - 200r
G = 1000
T = 1000
M = 6000
1. Derive IS-LM curve
2. Solve for equilibrium
3. Cut taxes by 20% & keep M constant r=y
4. Engage in monetary policy to keep interest rate constant new MS
5. What monetary policy is needed to keep output constant
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