For each of the following situations, use the ISLMFX model to illustrate the effects of the shock.
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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 (increase, decrease, no change, or ambiguous) on the following variables: Y, i, E, C, I, TB. Assume that the government responds by using monetary policy to stabilize output. See the following diagrams.
a. Lump-sum taxes increase.
b. Foreign income increases.
c. Investors expect an appreciation of the home currency.
d. The money supply decreases.
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