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show how to derise the IS curve when exports are given by the following equation: Problem 1 Show how to derive the IS curve when

show how to derise the IS curve when exports are given by the following equation:

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Problem 1 Show how to derive the IS curve when exports are given by the following equation: Egg in + til"g. Assume the remainder of the model is unchanged from the original setup in Chapter 11. Show that the original IEturve is given by a particular version of the new ISeurve with the new equation for exports when I? = {L Draw the IMagrarn (that is, the diagram with the real interest rate, R, on the vertical axis and shortrun output, 1?, on the horizontal axis] for two cases: 1] The original IScurve when at = II] and the new IS~eurve when ti = '15. Suppose the real interest rate increases by 1 pereentage point. What happens to shortrun output in the two models? Is short-run output more sensitive to ehanges in the real interest rate in one of the models? Give a careful explanation

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