Consider the following Keynesian closed economy:

a. What is the equation of the IS curve and LM curve?

b. Suppose that the price level is fixed at 5 in the short run. What are the short-run equilibrium values of output, the real interest rate, consumption, and investment?

c. What are the long-run equilibrium values of output, the real interest rate, consumption, investment, and the price level?

d. What is the value of velocity in long-run equilibrium?
\(e\). Suppose that the government aims to bring the economy back to the long-run equilibrium with the price fixed at 5. You are required to compute each of the following: (i) the level of government expenditure; (ii) the level of tax; and (iii) the level of money supply to achieve the above aim. Comparing your results with their initial value, how will they change? (Note: continue to assume that \(\pi^{e}=0.1\).)

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C = 100.8(Y - T) - 30r I = 40 - 20r G = 30 T = 40 Yf = 182.5 M = 600 L = 20+0.8Y 200(r + ) = 0.1