Exercise 3. Calculation with the IS curve and the multiplier. Show how to derive an 15 curve that includes the consumption multiplier. That is. assume investment is described by it = 51?: w HR: , and consumption is described by C; = 05?: + 2: 17:. The other categories of expenditures follow the same rules as in class. a} Show how to get the expression of the IS curve for this case. b) Why,r do we say that there is a multiplier? What is the magnitude of the multiplier? Explain the intuition behind the multiplier. Assume 'F = 0.02.11 = 0.5.x = 0.4, and that there are no short-term demand shocks E = 0. c} How does output respond when the real interest rate increases by 0.01. d) Draw a graph of the baseline lS-curve and the lS-curve with the multiplier. You should plot the \"short-term uctuation\" (X-axis) vs the real interest rate in the (Yaxis), for each case. Which curve is atter, and why? e} By how much does output increase if there is an aggregate demand shock that increases {15 by 0.01