Learning Objective in this assignment: Get comfortable with concepts presented in Section 4 (IS-LM model) Be able to derive the IS-LM graphically and algebraically using the standard model presented in class Be able to derive new IS-LM relationships with minor changes to the modeling assumptions Be able to derive government spending (or other policy) multiplier with any given IS-LM model 1. Suppose the Kingdom of Rohan has potential output of 10,000 with government purchases equal to 2,000 and taxes levied equal to 200. Desired investment and consumption (investment and consumption demand) are described by the following equations: C=1300 + 0.5(Y - T) -200r / = 3000 - 100r a. Please detail how desired consumption for the Kingdom of Rohan differs from the benchmark model we learned in class. Can you justify this change in modeling assumption? Please explain your reasoning carefully. b. Please specify a national savings function for the Kingdom of Rohan using the information given (assume output is at potential). c. Assume the Kingdom's goods market is in equilibrium at the potential level of output, calculate the values of the real interest rate, national savings, and investment. d. Please illustrate the impact of the new modeling assumption (as detailed in part a) on the goods market of Rohan, i.e. graphically show how the investment and/or savings curves are affected by the new assumption. Explain your illustrations briefly. e. What is the impact of the new modeling assumption on the slope of the IS curve? Is the IS curve for Rohan flatter or steeper than the baseline model from class? Use the goods market graph you drew in part d to help you derive Rohan's IS curve and answer the question. Give an intuitive explanation for the change in slope