Consider the following IS-LM model:
C = 200+ 0.25%
I= 150+ 0.25Y -1000i
G = 250
T = 200
(M/P)64 - 2Y -8,000i
M/P 1,600
e. Solve for the equilibrium values of C and I and verify the value you obtained for Y by adding up C, I, and G. M - 1,840
f. Now suppose that the money supply increases to M/P = 1,840 Solve for Y, i, C, and I, and describe in words the effects of an expansionary monetary policy.
g. Set M/P equal to its initial value of 1,600. Now suppose that government spending increases to G = 400. Summarize the effects of an expansionary fiscal policy on Y, i, and C.
