We will consider a closed economy, no exports or imports. In this economy: autonomous consumption is $3 trillion, autonomous investment is $1.5 trillion, autonomous government spending is $2 trillion, taxes are $3 trillion, d=.2, mpc=.5, and f=1.5)
a) derive the IS curve (I think the equation for this is… )
c) suppose we are at a point below the IS curve. Is the goods market equilibrium, if not how can it reach equilibrium?
d) suppose the MP curve is r= 2 + .5 * π, derive the AD curve