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Question 1: IS-LM and AD-AS Model (Classical economic theory without Misperception Theory) Use the IS-LM and AD-AS model to analyse the effects of each of the following on the economy on short run equilibrium levels of real interest rate, output, price and consumption. It is assumed that there is no sticky price adjustment. Draw the IS-LM and AD-AS (without misperception theory version) graph to show your answers and briefly explain. (a) A reduction in the effective tax rate on capital increases desired investment (5 marks) (b) The expected rate of inflation increases (5 marks) (c) An influx of high-skilled immigrants increases labour supply (ignore any other possible effects of increased population) (5 marks) (d) There is an improvement in the efficiency of payment technologies