Assignment (Chapter 5) 1. Explain how the DD schedule would shift in the following cases: a. An increase in taxes b. An increase in foreign prices 2. Explain how the AA schedule would shift in the following situations: a. An increase in domestic prices b. An increase in foreign interest rates. 3. A permanent monetary expansion has a greater short-run impact on output and the exchange rate than a temporary monetary expansion. Explain why. Notes: In Problems 1 and 2, you should use a graph to derive the new DD schedule. In Problem 3, you are required to use the DD- AA model to describe the effects of permanent and temporary increases in the money supply