5. Use the IS-LM-FX Model to analyze the impact of a second generation crisis. Assume that the country is hit by a negative investment shock. Show that it is more costly for the central bank to defend the exchange rate (measured as a drop in output) if investors believe that the exchange rate will be devaluated than if they do not expect a devaluation.

6. The second-generation models allow for the possibility of multiple equilibria. What do multiple equilibria refer to in this context?