Assume that capital is perfectly mobile and the exchange rate is fixed. Using the Fleming-Mundell model analyze the long run impact on domestic Y and i of the following shock. Also state the impact on domestic central bank reserves of foreign currency.

1/ Suppose the domestic economy has persistent trade surpluses and investors believe the central bank will need to lower the central parity. Assume the central bank maintains the old central parity despite investors' beliefs.

2/ Suppose the domestic money growth rate falls. Using Fisher's condition analyze short versus long run effects on the depreciation rate of the domestic currency.

Please do explain this with graphs (IS - LM)