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Demand side: Suppose we are given the following forms for aggregate con sumption demand and investment demand: C = 01(Y T) + 02(Y' T') c3? 1 = d1'-" + (122' + dgK, where c1, 02,63 are xed positive parameters for consumption demand and d1, d2, d3 are xed positive parameters for investment demand. Furthermore, the government runs a balanced budget, G = T and G' = T' 1. -_ Briey explain what the consumption demand function says. State the two equations which dene the output demand curve (IS curve) Explain how these two equations are used' in deriving the output demand curve. 2. _ _. ' Suppose we are given following values: 111 = 0.6, (:2 = 05,133 = 10, d1 = 20,112 = 1 and d3 = 0.5. Suppose that Y' = 15,G = 10, G" = 10,2' = 5,K = 15 and r = 0.1. Calculate desired aggregate expenditures for three levels of aggregate income: when Y = 35, Y = 40 and when Y = 45. 3. . ' For the given values calculate the level of aggregate expenditure that lies on the output demand curve. Show your work. 4. ' _ Suppose G increases to G = 12. By how much does the desired expendi ture line shift up? By how much does expenditure change? By how much does consumption change at the new level of expenditure