Desired$$ consumption:$$

CSuperscript dd

$=$

$240240$

$+$

$0\mathrm{.}600\mathrm{.}60($Yminus$$T$)$minus$540540$r

Desired$$ investment:$$

ISuperscript dd

$=$

$240240$minus$470470$r

Real money$$ demand:$$ L$=$

$0\mathrm{.}40\mathrm{.}4$Yminus$520520$i

$$Full$-$employment output:$$

Upper Y overbarY$$

$=1$ comma $0601,060$

Expected$$ inflation:$$

pi Superscript ee

$=0$

Part $2$

a$.$ Suppose that T$=$ G$=$

$210210$

and that M$=$

$7$ comma $6507,650.$

Find an equation describing the IS curve.

$$IS: Y$=$

$12001200$minus$10101010$

r$$

$($Enter

your responses rounded to the nearest whole

number.$)$

Part $3$

Find an equation describing the LM curve.

$$LM: Y $=$

enter your response hereleft parenthesis StartFraction $1$ Over Upper P EndFraction right parenthesis$1$P

$+$

enter your response here

r$$

$($Enter

your responses rounded to the nearest whole

number.$)$

Part $4$

Use the IS and LM equations to find the equation of the aggregate demand curve that shows the relationship between Y and

P$.$

$$AD: Y$=$

enter your response here

$+$

enter your response hereleft parenthesis StartFraction $1$ Over Upper P EndFraction right parenthesis$1$P$$

$($Enter

your responses rounded to the nearest whole

number.$)$

Part $5$

Use the $$IS$,$

LM$,$

and AD equations you derived above to determine the equilibrium values of$$ output, the price$$ level, the real interest$$ rate, consumption, and investment. Assume that there are no misperceptions about the price level.

$$Output$,$ Y$=$

$10801080$

$($Enter your response rounded to the nearest whole$$ number.$)$

Part $6$

$$Price$,$ P$=$

enter your response here

$($Enter your response rounded to two decimal$$ places.$)$

Part $7$

Real interest$$ rate, r$=$

enter your response here$\%$

$($Enter your response as a percentage rounded to two decimal$$ places.$)$

Part $8$

$$Consumption$,$ C $=$

enter your response here$$

$($Enter your response rounded to one decimal$$ place.$)$

Part $9$

$$Investment$,$ I$=$

enter your response here$$

$($Enter your response rounded to one decimal$$ place.$)$

IS: Y $=$Expected inflation: pi Superscript e $=0$r $($Enter your responses rounded to the nearest whole number.LM: Y $=$left parenthesis StartFraction $1$ Over Upper P EndFraction right parenthesisleft parenthesis StartFraction $1$ Over Upper P EndFraction right parenthesis $+$r $($Enter your responses rounded to the nearest whole number.AD: Y $=++$left parenthesis StartFraction $1$ Over Upper P EndFraction right parenthesisOutput, Y $=($Enter your response rounded to the nearest whole number.Price, P $=($Enter your response rounded to two decimal places.Real interest rate, r $=\%($Enter your response as a percentage rounded to two decimal places.Consumption, C $=($Enter your response rounded to one decimal place.Investment, I $=($Enter your response rounded to one decimal place.