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

Question:

For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock and the policy response. Note: Assume the government responds by using monetary policy to stabilize output, unlike question 3, and assume the is floating. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, and TB.
See the following diagrams. Point B is identical to the outcomes shown in question 3. Point C shows the outcome when monetary policy is used to stabilize output.
a. Foreign output decreases.
b. Investors expect a depreciation of the Home currency.
c. The money supply increases.
d. Government spending increases.
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...