2. The production function in an economy is Y = 2(5L -0.0025L). The labor supply curve is L = 55+ 10(1 - TW, where is the amount of labor supplied, w is the real wage, and 7 is the tax rate on wage income, which is 0.5. Desired consumption and desired investment are C = 300+ 0.8(Y - T) - 200r I = 258.5 - 250r 1 Government purchases and taxes are G = 50 T= 20+ 0.5Y Money demand is MD P = 0.5Y - 250(r +) where the expected rate of inflation, 7, is 0.02. The nominal supply of money M$ = 9150. (a) What are the general equilibrium levels of the real wage, employment, and output? (b) For any level of output, Y, find an equation that gives the real interest rate, that clears the goods market; this equation describes the IS curve. What are the general equilibrium values of the real interest rate, con- sumption, and investment? (c) For any level of output, Y, find an equation that gives the real interest rate that clears the asset market; this equation describes the LM curve. What is the general equilibrium value of the price level? (d) Suppose that government purchases increase to G = 72.5. Now what are the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and price level