The following equations describe an economy.
Y= C + I + G
C= 50 + 0.75 (Y-T).
I= 150 - 10 r.
(M/P)^d = Y - 50r.
G = 250
T= 200
M= 3,000
P= 4
A. Identify each of the variables and briefly explain the meaning.
B. From the above list, use the relvant set of equations to derive the IS curve. Graph the IS curve on an appropriately labeled graph.
C. From the above list, use the relevant set of equations to derive the LM curve. Graph the LM curve on the same graph you used in part (b).
D. What are the equilibrium level of income and the equilibrium interest rate?