Consider the following IS-LM model: C = 200 + .30 YD
I = 150 + .30 Y – 1000i
G = 200
T = 200 (M/P)d = 2Y – 8,000i
M/P = 1600
(a) Derive the IS equation. (Y = …) (b) Derive the LM equation (Write this as i = …) (c) Solve for equilibrium output (Y). (d) Solve for the equilibrium interest rate. (e) Solve for the values of C, I, and G at equilibrium. (f) Next, allow the real money supply to increase to 1800. Solve for the new equilibrium values of output, the interest rate, C, I, and G.