A small open economy is described by the following equations:

Y = C + I + G + NX;C = 50 + 0.75*(Y - T);I = 200 - 20*r;NX = 200 -50; G = 200; T = 200; (M/P)^d= Y - 40*r; M = 3000; P = 3, r* = 5.

a)Derive and graph the IS* and LM* curves.

b)Calculate the equilibrium exchange rate, income, and net exports.

c)Assume a floating exchange rate. Calculate what happens to the exchange rate, income, and net exports if the government increases its spending by 50.a)

d) Now assume a fixed exchange rate. Calculate what happens to the exchange rate, income, net exports, and the money supply if the government increases its spending by 50.