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 (increase, decrease, no change, or ambiguous) on the following variables: Y, i, E, C, I, TB. Assume that the government allows the exchange rate to float. See the following diagrams.

a. Lump-sum taxes increase.

b. Foreign income increases.

c. Investors expect an appreciation of the home currency.

d. The money supply decreases.

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S № .LV N Y₂ Y₁ B IS₂ IS₂ LM, ER Question 4a I ■ IS₁ LM, ER Question 4c 2 1 IS₁ 5 S A E₁ E₂ A B B Ę₂ E₁ FR₂ DR, i, DR₂ FR₁ EH/F DR, i DR₂ FR₁ EHF B Y₁ Y₂ LM₂ Question 4b LM, ER IS₁ -SN IS₂ Question 4d IS, LM, ER ↑ B A E₂ E₁ E₂ E₁ ↑ DR₂ .DR, FR, EHF DR₂ DR₁ FR₁ EHF