2 Assume that the following IS-relationship holds, with the output gap and the real interest rate r written as a percentage. r = 3 - 0.5 x Output gap a) Which interest rate corresponds to an output gap of zero? What does that mean? b) The central bank sets an interest rate of 4%, with a risk premium of 1%. Draw the IS and MP curves, make sure to label the axes. c) Indicate the short-run equilibrium in the graph. What sort of output gap is that? Interpret your answer. d) Which interest rate does the central bank need to set to get the economy out of the recession? Show how the graph changes and interpret your