Question: Y5 C = 500 + 0.75(Y-T) P = 2 I = 100 - 50r (M/P)^D = y - 200r G = 1000 T = 1000

Y5

C = 500 + 0.75(Y-T)

P = 2

I = 100 - 50r

(M/P)^D = y - 200r

G = 1000

T = 1000

M = 6000

1. Derive IS-LM curve

2. Solve for equilibrium

3. Cut taxes by 20% & keep M constant r=y

4. Engage in monetary policy to keep interest rate constant new MS

5. What monetary policy is needed to keep output constant

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