decline in consumption spending. Here is an excerpt: Y "I think the U.S. consumer is walking towards a cliff, basically," Chris Watling, chief executive of financial advisory firm Longview Economics, told CNBC's "Squawk Box Europe" on Wednesday. He said that a slew of recent economic indicators had showed consumers are quickly running out of excess cash, while household savings are coming under pressure. a. Use the Mundell/Fleming model to predict how this would affect income, interest rates, the exchange rate, and the Trade Balance. b. If the Fed wanted to regain the initial income, what kind of monetary policy would it implement? Depict it and its effects using the appropriate graphical tools. c. Given your answers to parts a and b, predict the net effects of these two shocks on income, interest rates, the exchange rate, and the Trade Balance