3. Consider the small open economy. under flexible exchange rates and perfect capital mobility as follows: Consumption: C =200 + 0.69 Y Investment: I= 80 - 1000 r (1=0.01 means interest rate is 1%) Government Purchases: G = 20 Money Demand: L = 0.5 Y - 200 r Money Supply: M = 115 Net Exports: NX = 85 - 0.09 Y - e, (where e is the real exchange rate) Potential GDP: Yf = 300 Assume initially (i) both the domestic and foreign price levels price levels are equal to one, i.e. P = Pf = 1, and (ii) the economy is in general equilibrium. a. Find the equation for the LM schedule. b. Find the equation for the BP schedule if the foreign interest rate is If C. Find the values of the domestic interest rate and nominal exchange rate in the initial equilibrium. d. If the foreign interest rate increases by 2.5%, what are the values of the domestic output and the real exchange rate in the short run equilibrium? e. Find the values of output, the domestic price level and the real exchange rate in the long run quilibri