Assume the following equations pertain to the economy of Biadanman:: Y= 1250 – 50r r=(1/30)Y-15 C=100+0.8Yd T=50+0.25Y L

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Assume the following equations pertain to the economy of
Biadanman::
Y= 1250 – 50r r=(1/30)Y-15 C=100+0.8Yd T=50+0.25Y
Ld=(1/3)Y-100r
(a) Derive and interpret the slopes of the IS and LM curves above.
Is the IS curve flatter than the LM curve? Explain.
(b) Find the equilibrium levels of income (Yo*) and the interest
rate (r*0).
(c) Assume an 800 unit increase in government spending is financed
by a 500 unit
increase in taxes and a 300 unit increase in money supply:
i) By how much and in which direction will the IS curve shift? What
is
equation for the new IS curve?
ii) By how much and in which direction will the LM curve shift?
What is
equation for the new LM curve?
(d) Use the original LM equation and your IS in part C(i) above to
determine the new equilibrium values of income and interest rate
(Y1, r1). With the help of an IS-LM diagram explain why income and
interest rate changed the way they did in this part.
(e) Use the original IS curve and your LM in part c(ii) above to
determine the new equilibrium values of income and interest rate
(Y2, r2). With the help of an IS-LM diagrams explain why income and
interest rate changed the way they did in this part.
(f) Use your IS and LM curves in parts c(i) and c(ii) above to
determine the new equilibrium values of income and interest rate
(Y3, r3). With the help of an IS-LM diagrams explain why income and
interest rate changed the way they did in this part.