Question: .Suppose that C = 60 + 0.8Yd I = 150 - 10r G = 250 T = 200 Ms = 100 Md = 40 +

.Suppose that

C = 60 + 0.8Yd

I = 150 - 10r

G = 250

T = 200

Ms = 100

Md = 40 + 0.1Y -10r

a.Write the equations for the IS and LM schedules.

b.Find the equilibrium values for income and interest rate.Find the new equilibrium when money supply increases to 130.Show the change graphically.

c.If investment is completely interest inelastic:

(i)What are the new equations for the IS and LM schedules.Show them graphically.

(ii)Find the new equilibrium values for income and interest rate.

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