2. The demand for imports might vary with the current state of the economy as well as with potential output. For example, when the economy contracts, demand for imported goods by households and firms tends to fall. To incorporate this channel for aggregate demand into the model, suppose that import demand is given by m + n. Assume no other changes to the model with the consumption multiplier. IM a) Derive the new IS curve including this specification for imports. b) Show how affects the slope of the IS curve in the equation and in a graph of the IS curve. What is an economic interpretation of how changes the IS curve? c) For a constant interest rate, does making imports endogenous, as you did, reduce the impact of a shock that raises by 1%? Given an economic explanation for your