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You are given the following hypothetical information about the Commodity and Money markets of a closed economy without government intervention. The commodity market Consumption function: C = 100 + 0.3Y Investment function: I = 2,000 – 2.1r The Money Market Lt = 0.2Y (transaction demand for money function) Ls = 10 – 2r (speculative demand for money function) MS = 1,500 (money supply function) a.) Derive the IS curve. ( 1 marks) b.) Derive the LM curve ( 1marks) c.) Derive the equilibrium level of income and rate of interest. ( 4 marks) d.) If the money supply is increased by 75, what would be the effect on the equilibrium level of income and rate of interest
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