Problem Set II - Page 4 of 5 9/23/2021 ECON 3350 (90 points) Graphically depict the long run response to an increase in fe. ECON 3350 Problem Set II - Page 2 of 5 9/23/2021 1. (45 points) Consider the model of aggregate demand presented in class. The IS, MP. AS curves, and the Fisher Equation are given below. IS : yt = 1 - mpc At - d - x 1 - mpc -Tt (1) MP : rt = it + Ant (2) AS : Tt = 1-1 + (31 - yi ) + p (3) Fisher Equation : Rut = *t + Tt (4) (a) (15 points) Algebraically derive equilibrium values for yt and it. (b) (15 points) Algebraically show how yt, Tt, and it adjust to an increase in ft in the short run