Use the model of the small open economy to predict what would happen to the trade balance, the real exchange rate, and the nominal exchange rate in response to each of the following events.

1. An increase in consumer confidence about the future induces consumers to spend more and save less.
2. A tax reform that decreases the incentive for businesses to build new factories.
3. The central bank reduces money supply by half.
4. New regulations result in increase in the use of credit cards which would decrease the demand for money.