Question: Hey looking for help really struggling with this question, please detail each response for both part a and b Consider the following equation: NX(E) =

Hey looking for help really struggling with this question, please detail each response for both part a and b

Consider the following equation: NX(E) = S -I(r*) This equation is used to draw the diagram illustrating the foreign exchange market, where there is a negative relationship between NX and &; and S, -I(r*) is perfectly inelastic. Here NX is net exports, & is the exchange rate, S represents the level of savings in the economy, I represent the level of investment in the economy, and r is the interest rate. a. Use a carefully labeled diagram to illustrate the effect of a contractionary fiscal policy at home on savings, interest rate, net capital outflow and the exchange rate (10 marks) b. Use a carefully labeled diagram to illustrate the effect of a contractionary fiscal policy abroad on savings, interest rate, net capital outflow and the exchange rate (10 marks
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