1) Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G, and desired investment is

Id = 100 - 500r. Real money demand is Md/P = Y - 2000i. Other variables are e = 0.05,

G = 200, = 1000, and M = 2100.

Find the equilibrium values of the real interest rate, consumption, investment, and the price level.

2) Use the IS-LM model to determine the effects of each of the following on the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and the price level.

(a) Tougher immigration laws reduce the working-age population.

(b) There's increased volatility in the prices of stocks and bonds.

(c) The government tries to achieve tax equity by an increase in the corporate tax rate.

(d) Increased computerization reduces stock market brokerage costs.

3) Consider a small open economy in equilibrium with a zero current account balance. What happens to national saving, investment, and the current account balance in equilibrium if

(a) future income rises?

(b) business taxes rise?

(c) government expenditures decline temporarily?

(d) the future marginal product of capital rises?

4) A large open economy has desired national saving of S^d = 1200 + 1000r^w, and desired national investment of I^d = 1000 - 500r^w. The foreign economy has desired national saving of S^d_for= 1000 + 1000r^w, and desired national investment of I ^d_For= 1800 - 500r^w. Calculate the equilibrium values of r^w, CA, CA_For, S, I, S_For, and I_For.