Problem 1. Suppose the economy is given by the following: Consumption function: C= 26 + 0.6(Yd) Investment function: I= 23 -5|]r Government spending: G = III] Tax collections: T = 1'!) Exports schedule: X= 6- E Imports schedule: (M) = 2 + 36 Money supply: M = 492 Nominal Money demand L(Y)= SY-Sr Price level=1 Labor supply=50 Production Jnction=2N g) Suppose the government decides to increase G to 12. Compute the new short-run equilibrium levels of output, and exchange rates. h) Graph and explain the adjustment of the economy to this shock