$12.$ In the Mundell$-$Fleming model, under fixed exchange rates the domestic interest rate is determined by the:A$)$ the central bankB$)$ domestic rate of inflation.C$)$ world rate of inflation.D$)$ world interest rate$\mathrm{.}13.$ In the short$-$run $/$S$-$LAf model with income taxation, taxes are given by T $=$ T $+$ tY$.$ Suppose that MPC $=|0\mathrm{.}75$ and the marginal tax rate r $=0\mathrm{.}2.$ Then, when $7$ decreases by $100,$ then for any given interest rate, the IS curve shifts horizontally$1)$ to th fight by $187\mathrm{.}50,$C$)$ to the right by $375\mathrm{.}25$D$)$ to the left by $35014.$ Consider the following short$-$run $/$S$-$L$/$ model with income taxation. The economy is described by equationsThen, in the short run, the equilibrium output for the economy is given by $($approximately$)$:A$)$ Y$*=2908\mathrm{.}32$B$)$ Y$\backslash$deg $=2343\mathrm{.}75)=1925\mathrm{.}6715.$ Cothough $(6$: $()305+0367-1)2)=500-30912)03.497120-0\mathrm{.}1\%5)$Y$-$C$47$G: $(6)$ M$/$P $=1\mathrm{.}5$Y $-60$r where the nominal money supply M $=3000$ and the price level is P $=$ I. $($There are$10\%$ income taxes in this model$).$Then, in the short run, the equilibrium interest rate is given by $($approximately$)$:A$+*=7\mathrm{.}35$B$)$r$*=11\mathrm{.}08$C$)$r$*=8\mathrm{.}571$D $+=15\mathrm{.}24$Suppose that the business confidence index falls so that now I $=400.$ That is$,$ I decreases by $100$ units.Suppose that the Central Bank wants to maintain output constant $($at the level you found in Question $14),$ by$|$ how much must the money supply change $($approximately$)?$B$)$ The money supply must merease by $121$ unis.C$)$ The money supply must decrease by $367$ unitsD$)$ The money supply must increase by $305$ units.Suppose that the business confidence index falls so that now $/=400.$ That is$,$ I decreases by $100$ units.Suppose that the Central Bank wants to maintain the interest rate constant $($at the level you found in Question $15),$ by how much must the money supply change $($approximately$)?$Hint: First find the new output level.A$)$ The money supply must decrease by $215$ units.B$)$ The money supply must increase by $121$ unitsC$)$ The money supply must deerease by $533$ unitsD$)$ The money supply must increase by $405$ units.Consider the following Mundell$-$Fleming short$-$run model of$\text{'}$ an open economy under floating exchange rates given in equations $($I$)-(9).$ Assume there is perfect capital mobility so that the domestic interest rate equals theworld interest rate, i$.$c$.,$ r $=$ r$*.$ The nominal exchange rate is denoted by e$.$ There is income faxation in thiseconomy.$(1)$ C $=360+0\mathrm{.}8($Y $-7)$:$21=280-601(4)$G $=488(5)$T $=200-$: $0\mathrm{.}25$Y$(6)$ NX $=220-50($ P$/$P$*)$e$(7)$ PE $=$ C $+1+6+$ NX$(7)$Y $=$ C $+1+$ G $+$ NX Goods market equilibrium$(9)$ N$*\_$M Money market equilibriumSureten price the Whilethe wor theme at money suply M$*=4000$ and that $=2.$ Also suppose that the$18.$ The equilibrium output level in this economy Y $\text{'}$ is given byA$)$ Y$"=1620$B$)$ Y$*9=1200$C$)$ Y$=620$D$)$ Y$"=1160$