The national income identity is given by Y,=C.+I.+Gt+EXtIlnt [1] where Y. is real acme] output. (I. is consumption, l: is investment. 6, is government spending. EX; is exports. and [MI is imports {all in period t}. Assume that the "demand\" variables are given by: r at I7 2 an +91?\" {3) Ext 17 _ a\" [4'] r \"\"t r, = a!\" [5) ll1117!=-'37t5(1Rr-FJ (6] where E; . E . a\" , Elm . it . QT snd 5 are given positive parameters. Moreover, l"t represents potential output is shortrun output, R, is the real interest rate. and f is the marginal product of capital or just the long run interest rate. I of 5) Combine equations (2)-(6) with {1) to obtain the [5 curve. This curve should have short run output on the khmd side and the real interest rate on the right-hand side. Recall Item the lectures that we dened short run output as it", = \"+95 In other words. short run output is the percentage I difference ofactua] output from the potential. {J 6' points} 2 of5) Assume that t= (M. if 0.l. 5.3:\".1'Ejm= {LL 5120.2. 5=1.25. F = 0.05. and g' = 0.?5. Draw a graph with the 15 and the MP curve in the long run. For the MP curve assume that the Fed just acts R; equal to the MPK. Be sure to clearly label the points on the yaais and taxis where the curves cross. (It! points) 3 of 5} Nonr assume that an: 0.05) First interpret this change in words. What kind of a shock is this? Then show how this changes your graph in part it}. Finally. solve for the level of E7, aerthe change in g. (Hpor'nts) 4 of 5) Now make the lisllowing change to equation (2) above: 63/?! = EC + 5'91. Assume also that g" = t}.25. Solve for the new [3 curve. How does your answierto part c) change? {10 points] 5 of 5] Explain what is going on in part d} compared to part c). That is. explain how the impact of a government spending shock is different and why it might be different from. your answer to part c). (It? points}