The answers submitted to the following questions are all wrong in one or more ways. You should work out the correct answer explaining why the given one was wrong and why yours is instead correct.

In the context of an open economy 3-equations model, analyse with a diagram how a temporary positive demand shock (lasting only one period) is stabilised by the central bank, commenting on whether the over or under-shooting result still applies.

IS RX p=r IS y y ERU 9 AD AD 4 V IS RX p=r IS y y ERU 9 AD AD 4 V