1. Consider an economy described by the following data (in $ trillion): Č- 3.25; i- 1.3 ; G= 3.5: T-3.0; NX = -1.00; 7 = 1; mpc= 75; a= 0.3; 6=0.1 a. Drive a simplified expressions for the consumption...

Extracted text: 1. Consider an economy described by the following data (in $ trillion): Č- 3.25; i- 1.3 ; G= 3.5: T-3.0; NX = -1.00; 7 = 1; mpc= 75; a= 0.3; 6=0.1 a. Drive a simplified expressions for the consumption function, the investment function, and the net export function. a. Drive the expression for the IS curve. b. If the real interest rate is r=2, what is the equilibrium output? If r= 5, what the equilibrium output? c. Draw the graph of the IS curve showing the answers from part (c) above. d. If government purchases increase to $4.2 trillion, what will happen to equilibrium output at r=27 What will happen to equilibrium output at r 5? Show the effect of the increase in government purchases in your graph from (d).