2. Suppose that the consumption function is given by: Ct=c1(YtGt)+c2(Yt+1Gt+1)c3rt Suppose that the investment demand curve is given by: It=b1rt+b2At+1b3Kt Here, c1,c2, and c3 are positive parameters, as are b1,b2, and b3. Government spending, Gt, is exogenous. The money demand curve is given by: Mt=Ptm1(rt+t+1e)+m2Yt Here, m1 and m2 are positive parameters. (a) Algebraically derive an expression for the IS curve. (b) Algebraically derive an expression for the LM curve. (c) Algebraically derive an expression for the AD curve. (d) Find an expression for how much the AD curve shifts in response to an increase in Gt (i.e derive an expression for what would happen to Yt, holding Pt fixed, when Gt increases). Argue that this must be positive but less than 1. 533 (e) Suppose that there is no Ricardian Equivalence and that the household is not forward-looking. In particular, suppose that the consumption function: Ct=c1Ytc3rt Re-derive the expressions for the IS, LM, and AD curves under this scenario. Is is possible that the AD curve could shift out more than one-for-one with the increase in Gt ? Under what kind of parameter values is this most likely