2. Using the ISLMFX model, illustrate how each of the following scenarios affects the home country. Compare

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2. Using the IS–LM–FX model, illustrate how each of the following scenarios affects the home country. Compare the outcomes when the home country has a fixed exchange rate with the outcomes when the home currency floats.

a. The foreign country increases the money supply.

b. The home country cuts taxes.

c. Investors expect a future appreciation in the home currency.

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