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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.

Cite references to material that you use in preparing the essay.

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