EconoLand is a small open economy with afloatingexchange rate that is currently in an equilibrium. It is defined by the following equations:

• C = 100 + 0.75(Y - T)
• I = 400 - 15r
• NX = 200 - 20e
• (M/P) = Y - 50r
• G = 200
• T = 300
• M = 5,000
• P = 2
• r^*=4

1. What is the equilibrium exchange rate in this economy?
2. If the government increases taxes by $100, what happens to the following? Give specific numerical changes where appropriate.

• exchange rate
• level of income
• the interest rate, r*
• and the money supply.