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Short Question 3: (23 points) B) Derive the IS curve as a relation between short run output )7, and the real interest rate Consider the following GDP equation, consumption function, exports function. imports gap R, F. You should show all the steps. (8 points) function and investment function and use them to answer the following questions K=C.+I,+G+EXtIM A) Write down the formula that denes short-tun output 1?; in terms of actual output Y. and potential output 2 (5 points) C) Assume the economy is at the steady state. Let :T: = 0.3. What would happen to short-run output in this model if (":9 increases by 0.10, keeping xed real interest rate R; at the steady state level? Is there a multiplier in this model? Explain why or why not? (6 points) D) Considermthe Phillips Curve from the simple-short run model we studied in Chapter 9: Am = 1714,. Let '5 = 0.3. Given your answer in part C), by how much do you expect ination to rise following an increase in government spending 69 of 0.10. (4 points)