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1. The following equations describe an economy. (Think of C, I, G,etc., as being measured in billions and i as a
percentage; a 5 percent interest rate implies i= 5.)

C =0.8(1- t)Y t = 0.25 I= 900 -50 i G= 800 L = 0.25Y- 62.5i M/P = 500

(P1) C depends on MPC and disposable income (P2) t is the marginal tax rate (P3) i is the interest rate (P4) (P5) (P6)

a . What is the equation that describes the IS curve? (2points)
b . What is the general definition of the IS curve? (2points)
c . What is the equation that describes the LM curve? (2points)
d . What is the general definition of the LM curve? (2points)
e . What are the equilibrium levels of income and the interestrate?