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11. For each of the following situations, use the ISLMFX model to illustrate the effects of the shock. For each case, state the effect of
11. For each of the following situations, use the ISLMFX 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, and TB. Note: In this question, assume the government allows the exchange rate to oat and makes no policy response. Hint: In each case, make use of the goods market equilibrium condition to understand what happens to consumption, investment, and the trade balance in the shift from the old to the new equilibrium. a. Foreign output increases. b. Investors expect an appreciation of the home currency in the future. c. The home money supply decreases. d. Government spending at home decreases
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