A two-equation model below represents goods sector and monetary sector equilibrium for a hypothetical economy (1):Y=i 0 /1-c+b/1-c.r i 0 >0, b <0, 0 0,

A two-equation model below represents goods sector and monetary sector equilibrium for a

hypothetical economy

(1):Y=i₀/1-c+b/1-c.r i₀>0, b<0, 0

(2): Y=i₀-e/f-g/f.r L_o>0, f<0, g<0, e>0.

As usual,is aggregate income,is the interest rate,0 is the autonomous investment, and0 is the level of money supply.

i) Find the equilibrium of the economy

ii)Suppose now, the monetary authority decides to increase the

quantity of money supply new level of money, evaluate the effect of such changes to

the economy