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With a production function in an economy being Y = A(5N 0.0025N^2 ) assume that A = 2..

The labor supply curve being N^S = 55 + 10(1 t )w Where N^s is the quantity of labor supplied, w is the real wage, and t is the tax rate on wage income which is 0.5,

Desired consumption and investment are: C^d = 300 + 0.8(Y T) 200r and I^d = 258.5 250.

Also with Taxes, T, is T = 20 + 0.5Y and where Government purchases ie (G) is G = 50.

Money Demand is Md P = 0.5Y 250(r + e ) The expected rate of inflation, e , is 0.02 and the nominal money supply, M^S, is 9150

1a What are the general equilibrium levels of the real wage, employment and output?

1b For any level of output at Y, find an equation that gives the real interest rate r that clears the goods market; this equation describes the IS curve. Then find what the general equilibrium values of the investment, real interest rate, and consumption are.

1c For any level of output, Y, find an equation that gives the real interest rate that clears the asset/money market; this equation describes the LM curve What is the general equilibrium value of the price level?

1d Suppose that government purchases increase to G=72.5. First demonstrate on a graph how that impacts the ISLM curves. Then find what the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment and the price level are when G increased to 72.5.