Consider a small open economy with fixed prices $($P$=1)$ characterized by the following

equations:

C $=50+0\mathrm{.}8($Y$-$T$)$

I $=120-2$r

G $=100$

T $=100$

NX $=300-200$e

M$=190$

Ld $=0\mathrm{.}2$Y$-3$r

r$*=2$

a$)$ Within a floating exchange rate system, obtain the IS$*,$ the LM$*,$ and the equilibrium

level of income, exchange rate, and net exports. Use graphics.

b$)$ Within a floating exchange rate system, the Central Bank lowers the money supply

by $30$ monetary units. Analyze the impact of this measure on the income and the

exchange rate. Use graphs and explain your results.

c$)$ Starting from the obtained equilibrium in b$),$ consider that the Government

conducts a trade policy increasing autonomous exports by $100($now NX$=400-200$e$)$

$.$ Is this an appropriate policy to promote economic growth $($increasing Y$)?$ Compute

the effect on income and the exchange rate. Would your answer change if we

consider a fixed exchange rate system? Use graphs and justify your results.

d$)$ Explain the effects that the policies proposed in sections b$)$ and c$)$ will have on the

composition of aggregate demand. Explain your answer.