Question 2. (18 points) Use the Keynesian cross to predict the impact on equilibrium GDP of a. An increase in government spending (6 points) b. An increase in taxes (6 points) c. An equal increase in both government spending and taxes (6 points) Question 3. (18 points) Assume that an economy is characterized by the following equations: C = 100 + (2/3)(Y - T) T = 600 G = 500 I = 800 - (50/3)r Ms/P = Md/P = 0.5Y - 50r a. Write the numerical IS curve for the economy, expressing Y as a numerical function of G, T, and r. (4 points) b. Write the numerical LM curve for this economy, expressing r as a function of Y and M/P. (4 points) c. Solve for the equilibrium values of Y and r, assuming P = 1.0 and M = 1,200. How do they change when P = 2.0? Check by computing C, I, and G. (6 points) d. Write the numerical aggregate demand curve for this economy, expressing Y as a function of G, T, and M/P. (4 points)