Elucidate situations which use the is-lm-fx model

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Reference no: EM1358392

For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, TB. Assume the government allows the exchange rate to float and makes no policy response.

a. Foreign output decreases

b. Investors expect a depreciation of the home currency

c. The money supply increases

d. Government spending increases

Reference no: EM1358392

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