1. Consider the following actions/occurrences listed in the first column. For each one, use the AA-DD model to determine the impact on the variables from the twin-deficit identity listed along the top row. Consider the final equilibrium short-run effects. Use the following notation:

+	the variable increases
	the variable decreases
0	the variable does not change
A	the variable change is ambiguous (i.e., it may rise, it may fall)

	Impact on
Sp	I	IM - EX	G + TR - T
a. A decrease in investment demand with floating ERs
b. An increase in investment demand under floating ERs
c. An increase in foreign interest rates under floating ERs.
d. An increase in government demand under floating ERs