How to do questions 23 24 25? Can you also draw the diagrams for me?

Home is a small open economy while Foreign is a large open economy, and Home has a exible exchange rate. Besides, both countries are in their long-run equilibrium. Now, to lower its budget decit, the Foreign govemment lowers its spending. Note: For both parts, you must provide explanations why the variables of interest change or remain unchanged in order to receive any credit. a) Use the Mundell-Fleming model (Y-r graph) to illustrate graphically and explain in words the short-run eects of this change on Home's output, net exports, real exchange rate, nominal exchange rate, and real money balance. Only the rst diagram will be graded. (10 points) b) Use the long-run classical model of a small open economy to show, in graphs and words, the long-run effects this change on Home's output, net exports, real exchange rate, nominal exchange rate, and real money balance. (10 points) Question 23 (20 points) Consider a small open economy with perfect capital mobility that adopts a exible exchange rate system, Also, the economy is initially in its long-run equilibrium. Suppose a computer virus has MGEBOG Sample Final Questions Iris Au 7 destroyed most of the country's payment system and, as a result, money becomes the primary method to facilitate transactions. a) Use the Mundell-Fleming to show the effect of this change on the country's output, real interest rate, nominal exchange rate, real exchange rate, price level, and net exports in the short run. Support your answer in words and TWO diagrams (Y-e diagram and Y-r diagram) (12 points) b) Now use the long-run model of a small open economy (with appropriate diagrams) to show the long-run effect of this change on the country's output, real interest rate, nominal exchange rate, real exchange rate, price level, and net exports. (8 points) Question 24 (20 points) Home is a small open economy that has a xed exchange rate and perfect capital mobility. It is also producing at its long-run production capacity. Recently, a trade dispute between Home and Foreign has been resolved, and the government of Foreign removed its 27.5% tariff on Home products. Note: For both parts of the question, you must provide explanations why the variables of interest change or remain unchanged in order to receive full credit. a) Use the Mundell-Fleming model (Y -e graph) to illustrate graphically and explain in words the short-run effects of this change on Home's net exports, real exchange rate, nominal exchange rate, national saving, and real money balance. Only the rst diagram will be graded. (10 points) b) Use the long-run classical model of a small open economy to show, in graphs and words, the long-run effects of this change on Home's net exports, real exchange rate, nominal exchange rate, national saving, and real money balance. (10 points) Question 25 (10 points) The economy in question is a closed economy and can be described by the ISLM model. Dierent proposals have been submitted to the government on how scal policy should be Le re a ' ?: Q E i$UEi El 53 lb$1 iEl Militia\" b) Use the long-run classical model of a small open economy to show, in graphs and words, the long-run effects this change on Home's output, net exports, real exchange rate, nominal exchange rate, and real money balance, (10 points) Question 23 (20 points) Consider a small open economy with perfect capital mobility that adopts a exible exchange rate system. Also, the economy is initially in its long-run equilibrium. Suppose a computer virus has MGE806 Sample Final Questions lris Au 7 destroyed most of the country's payment system and, as a result, money becomes the primary method to facilitate transactions. a) Use the Mundell-Fleming to show the effect of this change on the country's output, real interest rate, nominal exchange rate, real exchange rate, price level, and net exports in the short run. Support your answer in words and TWO diagrams (Y -e diagram and Y-r diagram) (12 points) b) Now use the longrun model of a small open economy (with appropriate diagrams) to show the long-run effect of this change on the country's output, real interest rate, nominal exchange rate, real exchange rate, price level, and net exports. (8 points) Question 24 (20 points) Home is a small open economy that has a xed exchange rate and perfect capital mobility. It is also producing at its long-run production capacity. Recently, a trade dispute between Home and Foreign has been resolved, and the government of Foreign removed its 27.5% tariff on Home products. Note: For both parts of the question, you must provide explanations why the variables of interest change or remain unchanged in order to receive full credit. a) Use the Mundell-Fleming model (Y e graph) to illustrate graphically and explain in words the short-run effects of this change on Home's net exports, real exchange rate, nominal exchange rate, national saving, and real money balance. Only the rst diagram will be graded. (10 points) b) Use the long-run classical model of a small open economy to show, in graphs and words, the long-run effects of this change on Home's net exports, real exchange rate, nominal exchange rate, national saving, and real money balance. (10 points) Question 25 (10 points) The economy in question is a closed economy and can be described by the IS-LM model. Different proposals have been submitted to the government on how scal policy should be conducted and these proposals are: Proposal 1: Use scal policy to target real interest rate Proposal 2: Use scal policy to target real output Which of the above proposal(s) would minimize short-run uctuations in investment if there were a reduction in autonomous consumption? Explain and support your answer by ONE IS- LM diagram (only the rst diagram will be graded). MGEBOS Sample Final Questions Iris Au 8 Eilllli