Derive the lm curve 5 marks 4 derive the ad curve 5

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3. Derive theLMcurve. [5 marks]4. Derive theADcurve. [5 marks]5. In response to the COVID-19 crisis, suppose that the government of theABOVEECONOMYincreases transfer payments to help people struggling during the COVID-19 pandemic.°(a) Show the short run e/ects of this policy using theFive-Figures Diagramwe drew in class; goods market, money market, theIS-LMcurves, the interestparity condition curve, and theAS-ADcurves. Explain your answer. [8 marks]°(b) How about the e/ects of this policy in the medium run? Assume that beforeand after the changes, the economy is still in a recession (i.e. its output is belowits natural level). To answer this question, draw theTwo-Figures Diagram;theIS-LMcurves and theAS-ADcurves. Explain your answer. [5 marks]°(c) Do you think this policy is su¢ cient to compensate for damage done to theeconomy´s production and consumption of goods and services during the epi-demic? Explain your answer. [2 marks]6. In response to the COVID-19 crisis, suppose that the foreign government increasesinvestment in new hospitals. Show the short run e/ects of this foreign policy on theABOVE ECONOMYusing theFive-Figures Diagramwe drew in class; goodsmarket, money market, theIS-LMcurves, the interest parity condition curve, and theAS-ADcurves. Explain your answer. [10 marks]7. Suppose that the central bank of theABOVE ECONOMYlowers its target for theovernight rate and buys government bonds to provide support to the economy duringthe COVID-19 pandemic.

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