Question 4. {16 points) Use the IS-[M diagram to describe the short-run and long-run effects of the following changes on national income, the interest rate, the price level, consumption, investment and real money balance. a. An increase in money supply (3 points) b. An increase in government spending (3 points) Question 5: (14 points} Assume that in a small open economyr where ll] employment always prevails, national saving is 300. a. If domestic investment is given by I = 400 - 20r, where r is the real interest rate in percent, what would the equilibrium interest rate be if the economy were closed? Why? (4 points) b. If the economy is open and the world interest rate is 10 percent, what will investment be? Why? (4 points} c. If the economy is open, what will the trade surplus or decit be? What will net capital outow be? (6 points)