Instructions: You may work on this problem set in groups of up to four people. Should you choose to do so, please make sure to legibly write each group member's name on the first page of your solutions. This problem set is due in class on Thursday April 12. 1. The Aggregate Demand Curve: The equations characterizing the demand side of the New Keynesian model (and the neoclassical model, for that matter) are: CI = C*(Y - GL, YHI - GHI,TI) Y = ath+G P (a) What are the exogenous variables in these equations and what are the endogenous variables? Please list them. (b) Write down (in words) the definition of the IS curve. Which of the equations above are summarized by the 15 curve? (c) Write down (in words) the definition of the LM curve. Which of the equations above are summarized by the LM curve? (d) Write down (in words) the definition of the AD curve. (e) Suppose that, contrary to our standard assumptions, both consumption and investment are completely insensitive to the real interest rate (i.c. 8 acd() - are = 0). What will the IS and AD curves look like under these assumptions? How do they look different relative to our standard model