4. Investment, Keynesian Cross and the AA-DD model. [25 points] \"The Keynesian Cross we reviewed in class is given by the equality of actual output {Y} and Aggregate demand {D} Y=D C=C{}+1[YT) 511* o=c+r+o+cxr ,Y _TrYF -TF) where c1 denotes the marginal propensity to consume, I, T and G the exogenously given Investment, taxes and government expenditures, E the nominal exchange rate, P and P* the domestic and foreign price levels. hSuppose that clue to sudden news about widespread corruption in Country X, investment in that country declines temporarily from l1 to I2 with l2 1: h. For simplicity assume that output was at its full employment level in Country X before the shock. In addition, assume a flexible exchange rate. a] {1D points] Describe and show graphically how this shock --the decline of Investment-- affects the Keynesian Cross diagram and the equilibrium income {Y}. Label your Keynesian Cross diagram property and explain carefully why the output and the equilibrium changeg b] [15 points} Use the AA-oo model to describe and to show graphically how this shock --the decline of Investmen -- affects the nominal interest rate, the nominal and real exchange rates, consumption, exports, imports, and equilibrium income in the short run. Assume that the country has a floating exchange rate. Label your Ala-DD diagram property and explain carefully why the equilibrium and the variables change_