Question: Consider the following numerical example of the IS-LM model: C = 200 + 0.25YD I = 150 + 0.25Y - 1000i G = 250 T

Consider the following numerical example of the IS-LM model: C = 200 + 0.25YD I = 150 + 0.25Y - 1000i G = 250 T = 200 i = .05

a.Derive the IS relation. (Hint: You want an equation with Y on the left side and everything else on the right.)

b. What is the level of real money supply when the interest rate is 5%? Use the expression: M/P = 2Y - 8000i

c. Solve for the equilibrium values of C and I.

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