a. Consider the AS-AD model presented in Jones, where the interest rate has an effect on the exchange rate. Analyse the effects of a higher global demand for exports. (5 points) b. Consider an individual with preferences over consumption, c, and leisure, 1 - h, according to the following utility function: U (c, h) = 0 Inc + (1 - 0)ln (1-h) The individual's budget constraint is given by, c = wh, where w is the wage. Assume 0 = 1/5. Solve for the individual's labour supply, h. (5 points) c. Consider a country with a debt-to-GDP ratio of 40 percent. The interest rate is 2 per cent and the GDP growth rate is 3 per cent. What must be true about the primary budget balance in order for government debt to be sustainable? Motivate your answer. (5 points)