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Assume the Following IS-LM Model
E Expenditure sector
Sp = C + I + G + NX
C = 110 + (2/3)YD
YD = Y - TA + TR
TA = (1/4)Y + 20
TR = 80
I = 250 - 5i
G = 130
NX = -30
Money Sector
M = 500
P = 1
md = (1/2)Y + 400 - 20i
a) Calculate the equilibrium values of private domestic investment (I), tax revenues (TA), and real money demand (md).
2b) How much of private domestic investment (I) will be crowded out if government purchases are increased by DG = 100?
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