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(30 points). 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
(30 points). 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 the government allows the exchange rate to float. 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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