answer question 1 part a through e

l. The following equations describe an economy: Consumption :C = 30 + 031'\" i Investment : l = 500 l3i Goverrunent Spending: G = 200 Transfer Payments: TR = 200 Taxes : TA = 0.21! LM Curve:Y = 2,500 + 100i Real Money Demand:L=ltY l1i Money Supp); : M' = 1,500 Price Level: P = 2 where Y is income, i is the percentage of interest rate. '1'\" is the disposal income, and k and h are positive parameters that govern the real moneyI demand. Notice that consumption is tat l n t' 1 t t It: i l t . (a) What are the values of {i} marginal propensity to consume out of disposal income and (ii) marginal propensity to consume out of total income? Show your work. (h) Derive the IS equation for the economy. Work. (4:) _ Find the values of {i} it and (ii) h that are consistent with the money' market equilibrium. summit. (d) ' Solve for the equilibrium levels of (i) output, (ii) interest rate, (iii) consumption, (iv) investment and (v) government budget surplus. W. (e) Derive the aggregate demand (AD) curve for the economy. Show your work. (1') _ ' Determine the size of the horizontal shi of the IS curve; that is, how much can output increase by if the interest rate is maintained at the same level as in part {d}. Show your work. (g) . Determine the sthee in the equilibrium output, while taking into account the equilibrium change in the interest rate. Show your tvorlt. (h) J Based on your answers to parts (ft and {2]. how much is the crowding-out effect ofan increase in the transfer payments on output? how your work. Note: start yarn- answer by dening in words what is wisely meant by the crowdingmut effect of an expansionary scal policy. (i) . Under the same price level P = 2. if the Federal Reserve System intends to eliminate the above crowding-out effect completely, how much should the nominal money supply (M') increase by? Shawls