[16 marks = 4 + 4 + 4 + 4] Suppose the economy was initially at the long-run equilibrium.The consumption in the country depends on the disposable income, Y-T, C = C(Y-T) and the investment depends on the interest rate of the country, i, I = I(i). The applicable IS-LM-FX model is pictured here:

Expected return LM A A DRI FRI ISI EI Y1 V EH/F