consider a small open economy with fixed exchange rate

four equations describe the economy: Y C(Y,T) +1(1,Y) +G+ NX (Y,Y*, ) (Goods market), MS P YL) [Money market], E PE P pe E P 1+i-i [Uncovered interest parity) and P = P (1+m) F (1 - :) (Aggregate supply]. Initially, the economy is in a medium-run equilibirum. Then, the gov- ernment engages in an expansionary fiscal policy and increases its ex- penditure from G1 to G2. (a) Use the IS-LM, AD-AS and IPC diagrams to show the short-run effects of this policy. (6 points) (b) Use the same IS-LM, AD-AS and IPC diagrams that you have drawn for part (a) and show the medium-run effects of this pol- icy. Assume adaptive price expectations: P = Pt-1. (6 points) four equations describe the economy: Y C(Y,T) +1(1,Y) +G+ NX (Y,Y*, ) (Goods market), MS P YL) [Money market], E PE P pe E P 1+i-i [Uncovered interest parity) and P = P (1+m) F (1 - :) (Aggregate supply]. Initially, the economy is in a medium-run equilibirum. Then, the gov- ernment engages in an expansionary fiscal policy and increases its ex- penditure from G1 to G2. (a) Use the IS-LM, AD-AS and IPC diagrams to show the short-run effects of this policy. (6 points) (b) Use the same IS-LM, AD-AS and IPC diagrams that you have drawn for part (a) and show the medium-run effects of this pol- icy. Assume adaptive price expectations: P = Pt-1. (6 points)