Question: Solve Problem 1. IS-LNI with procyclical investment (35 points) The economy is described by the following functions: 1 remul money demand money supply where i

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Problem 1. IS-LNI with procyclical investment (35 points) The economy is described by the following functions: 1 remul money demand money supply where i is the interest rate in the economy. 1. Derive the IS curve. Draw it in the (Y, i) coordinates. 2. Derive the LM curve. Draw it in the (Y, i) coordinates. 3. Derive the equilibrium output in the IS-LM model. 4. Find the multiplier a;ociated with government purchases. How does it compare. with the mul- tiplier in the ISLM model derived in class? 5. Derive. the AD curve.

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