The following equations describe an economy. Y = C + I + G.
C = 120 + 0.5(Y − T ).
I = 100 − 10r.
G = 50.
T = 40.
(M/P)d = Y − 20r.
M = 600. P = 2.
From the above list, use the relevant set of equations to derive the IS curve.
Graph the IS curve on an appropriately labeled graph.
From the above list, use the relevant set of equations to derive the LM curve.
Graph the LM curve on the same graph you used in part (b).
What are the equilibrium levels of income and equilibrium interest rate? With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4.
What happens? What are the new equilibrium interest rate and level of income?
Derive and graph an equation for the aggregate demand curve.​