IS-LM Model [10 points] Consider an IS-LM model where the central bank sets the nominal interest rate. The consumption and investment functions are given by c = 200 + 0.250\" T} I = 150 + 0.25Y 1000i, and suppose that government expenditures and taxes are given by G = 250 and T = 200, respectively. Let real money demand be given by My? = 21* 30001:. and let the initial interest rate be in = 0.05. [a) [2 points] Solve for the equilibrium values of output and real money supply. [b] [2 points] Solve for the equilibrium values of C and I, and verify that consumption, investment and government expenditures indeed add up to output Y. [c] [3 points] Now suppose that interest rate is cut to in = 0.03. Solve for the new equilibrium values of Y, MfP, C and I. What are the effects of this change on the economy? Provide brief intuition. [cl] [3 points] Set the interest rate back to in. = 0.05. Now suppose that government spending increases to G = 400. If the central bank keeps the interest rate unchanged. howr should monetary supply respond to this expansionary scal policy? What are the effects of this scal expansion on Y and 0? Explain