PLEASE DONT FORGET TO GRAPH THE PROBLEMS :$)))$

IS$-$LM Model

Consider an economy in the short run where prices are fixed. The economy is

characterized by a real money supply M$/$P and a real money demand L$($r$,$Y$)$ that is

decreasing in the real interest rate r and increasing in income Y$.$ There is also an

expenditure function: Expenditure $=$I$($r$)+$C$($Y$-$T$)+$G where r is the real interest rate, C$(.)$is

the consumption function, and G is government spending.

a$)$ Assume the great financial crisis of $2008-2009$ shock crashed stock markets and

decreased consumer spending. What does this imply for the IS and LM curves, and for

the equilibrium r and Y $?$

b$)$ Assume the Fed controls the money supply directly. How should the Fed respond to

bring output back to its previous value?