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After carefully reading all the available information, prepare a two page (double-spaced) essay and answer the following questions:

Assume that we have the following data:
C=100+0.50Y
I_p=100-20r
M_t=0.10Y
M_s=100-10r
M=80

a. Build the IS-LM function.

b. If we assume an increase in Investments by 100 units, calculate again the IS-LM functions.

c. The intersection of IS-LM functions defines four areas. Analyze the behavior of the markets for goods and money for each area.

C consumer expenditure

Ip investment, price of bonds

Mt Money time

Ms money savings

M money supply

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