Question

For each of the following situations, use the IS-LM-FX model to illustrate the effects of the...

For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I,TB. assuming the government responds to maintain a fixed ex-change rate.

A. Foreign income decreases.

B. Investors expect a depreciation of the home currency.

C. Private consumption increases exogenously..

D. The money demand increases.

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