5. For each of the following situations, use the IS-LM and FX diagrams to illustrate the effects of the shock. For each case, clearly state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): output (Y), nominal interest rate (i), exchange rate (S), investment (I), and trade balance (TB). Assume perfect capital mobility and that the government allows the exchange rate to float and makes no other policy intervention.

(a) Government spending increases. (5 marks)

(b) Money supply decreases. (5 marks)

(c) Investors expect a depreciation of the home currency. (5 marks)