III. International Borrowing and Lending, Short-Run Keynesian Model 1 1. Derive the IS curve using the diagrams below. Explain referring to the behavioral equations and your diagrams why the IS curve is downward sloping. (10pts) er D 12. Derive the LM curve using the diagrams below. Explain why the LM curve has the slope that it does. (10pts) Real bal. UT13. Home has a floating exchange rate and is hit by a (single) shock that causes the exchange rate to appreciate and lowers domestic output. Use the IS-LM framework to identify the kind of shock that hit the economy. Explain. (10pts) 14. A country with a fixed exchange rate experiences an investment boom. Using the IS- LM-FX framework analvze the impact of this shock on the interest rate, on output, on exports and on imports. Explain. (5pts)