Consumption function: C=1.7+0.7 YD

Investment function: I=1.5-5r

Government spending: G=1

Tax Collections: T=1

Real Money Demand Function: L^d=6Y-100r,

Nominal Money Supply: M=100

Price Level: P=2

Find an expression for the IS curve.

Find an expression for the LM curve.

Find the short run equilibrium values of output and real interest rates at the price P=2.

Suppose the government wants to increase output by 10.5 units. What level of government spending will accomplish this? Illustrate the changes in the IS-LM curves using an appropriate diagram.

Suppose the Fed wants to cut the interest rate to 0.09. What level of money supply will accomplish this? (Assume G=1 for this problem). Illustrate the changes in the IS-LM curves using an appropriate diagram.

Suppose the Federal Government and Fed decide to coordinate on policies so as to achieve a target output level of 10.5 without increasing the interest rate from the one found in c). What level of government spending and money supply will accomplish this?). Illustrate the changes in the IS-LM curves using an appropriate diagram.