1. (20 points) Short Questions. In no more than 3 sentences, please answer the following. (a) (5 points) "In the OLG model the effect of Rye, on s, is always ambiguous, no matter what we assume about the production function, the utility function or the parameter values." Is this TRUE or FALSE? Justify your answer. (b) (5 points) Think of the consumption-savings problem with a borrowing constraint (i.e. the agent cannot borrow at all in the first period). With this in mind, what do you think of the following statement? "If a government were to give that agent one extra dollar in the first period then the agent will undoubtedly consume 100% of that extra dollar." Justify your answer. (c) (10 points) Think of the equilibrium of an endowment economy. Starting from the equi- librium point, if there is a "demand shock" (i.e. an increase in future income, Y): what is final the effect on the current level of the interest rate (r,)? In answering this question you need to use graph from the derivation of the IS curve, Show your work