Given that IS is Y = 2500-50i, and the interest rate reaction function

is ip = 2 + 0.5(P-P*), where ip is the central bank policy rate. Assume that I (interest rate) is 0.5 + IP (interest rate is a wedge over the policy rate). Determine the AD function. If AS function was Y = 0.25(P-P*) + 2000 determine Y* and P* and inflation rate. Assume P* = 105.