nominal exchange rate. Assuming, to begin with, that the exchange rate is flexible, use an open economy IS-LM model to explain: Question parts (type your answers in the box provided using the labels (a), (b), (c), (d), (e), (f). (a) (3 marks) The effects of contractionary domestic monetary policy in the form of an increase in the domestic interest rate i on 1) domestic output. 2) domestic interest rates, 3) exchange rate and 4) net exports. (b) (2 marks) The effects of expansionary domestic fiscal policy, in the form of an increase in domestic government spending G (assuming no response by the domestic central bank) on 1) domestic output. 2) domestic interest rates, 3) exchange rate and 4) net exports. (c) (2 marks) The effects of contractionary foreign fiscal policy, in the form of a decrease in foreign government spending G* (again assuming no response by the domestic central bank) on 1) domestic output. 2) domestic interest rates, 3) exchange rate and 4) net exports