Consider the AS-AD model discussed in the course. Assume that the interest rate only affects investment, not net exports. The AD and AS curves are given by 1\"it =05B01'571') nt=nt_1+th+a a. What must be true of the model parameters and variables in the long-run equilibrium, i.e. in the steady state? Motivate your answer. (6 points) b. Analyse the effects of a negative demand shock. Describe the mechanisms that bring the economy to long-run equilibrium. (8 points) c. Explain how the AS and AD curves are affected if we allow for a mechanism whereby the interest rate affects the exchange rate. No derivations are needed. (6 points) d. Use the AS curve and Okun's law to derive a Phillips curve in terms of ination and unemployment. (5 points)