1. Describe how, if at all, each of the following developments affects the IS and/or MP curves:

a. The central bank changes its monetary policy rule so that it sets a lower level of the real interest rate at a given level of output than before.

b. Government purchases fall, and at the same time the central bank changes its policy rule to set a higher real interest rate at a given level of output than before.

c. The demand for money increases (that is, consumers' preferences change so that at a given level of i and Y they want to hold more real balances than before).

d. The government decides to vary its purchases in response to the state of the economy, decreasing G when Y rises and increasing it when Y falls.

e. The central bank changes its policy rule to be more aggressive in responding to changes in output. Specifically, it decides that it will increase the real interest rate by more than before if output rises, and cut it by more than before if output falls.