Show work, include graphs where needed1. Desired consumption and investment areCd= 4000-4000r+0.2YId= 2400-4000rAs usual, Y is output and r is the real interest rate. Government purchases are 2000.(a) Find the equilibrium value of the real interest rate if Y =10000.(b) Find the equilibrium value of the real interest rate if Y = 10200.(c) Graph the IS curve for this economy2. In a particular economy the real money demand function isMd/P=3000+0.1Y-10000iAssume that M=6000, P=2.0, πe = 0.02(a) What real interest rate r is consistent with equilibrium in the asset market when Y = 8000?(b) What real interest rate r is consistent with equilibrium in the asset market when Y = 9000?(c) Graph the LM curve.3. An economy is described by the following equations:Desired consumption Cd = 1275 + 0.5(Y – T) – 200r. Desired investment Id = 900 – 200r. Real money demand L = 0.5Y – 200i. Full-employment output Y = 4600. Expected inflation π e = 0. Government Purchases: G = 450Taxes: T = 450Money supply M = 9000a. Write equations for the IS curve, LM curve (given P) and AD curves (Hint: Using IS curve and LM curve to get the relation between Y and P, this is AD curve).b. Calculate the equilibrium values of output, the real interest rate, the price level, consumption and investment.4. Analyze the short-run (the price level is fixed) and the long-run (general equilibrium) effects of each of the following on the level of output, the real interest rate, and the price level. Illustrate your analysis graphically in two ways: (1) in an IS-LM-FE framework, and (2) in an aggregate demand-aggregate supple framework.(a) The expected rate of inflation declines.(b) Consumers increase their desired level of consumption at each level of income and the real interest rate.
Show work, include graphs where needed 1. Desired consumption and investment are Cd= 4000-4000r+0.2Y Id= 2400-4000r As usual, Y is output and r is…
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