Question: 6. Desired consumption is Cd = 10-0 + 0.8Y - 500r - 0.5G, and desired investment is Id = 100 - 5001 Real money demand

6. Desired consumption is Cd = 10-0 + 0.8Y - 500r - 0.5G, and desired investment is Id = 100 - 5001 Real money demand is MdJP = Y - 2000i. Other variables are are = 0.05, G = 200, = 100-0, and M = 2100. (a) Find the equilibrium values of the real interest rate, consumption1 investment, and the price level. (b) Suppose the money supply,r increases to 2300. Find the equilibrium values of the real interest rate, consumption investment, and the price level. (Assume that the expected ination rate is unchanged.) 2 points

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