Question: i) Suppose now that the Fed decides to decrease M to 400 (assume G is 10). Compute the new equilibrium levels of output, and exchange

i) Suppose now that the Fed decides to decrease M to 400 (assume G is 10). Compute the new equilibrium levels of output, and exchange rates.Problem 1. Suppose the economy is given by the following:

Consumption function: (3: 25 + 0.6{Yd1 Investment function: I: 2350r Government spending:

6 = 10 Tax collections: T = 10 Exports schedule: X: 6

(5 Imports schedule: [IM] = 2 + 3E Money supply: M =

i) Suppose now that the Fed decides to decrease M to 400 (assume G is 10). Compute the new equilibrium levels of output, and exchange rates.Problem 1. Suppose the economy is given by the following: Consumption function: (3: 25 + 0.6{Yd1 Investment function: I: 2350r Government spending: 6 = 10 Tax collections: T = 10 Exports schedule: X: 6 (5 Imports schedule: [IM] = 2 + 3E Money supply: M = 492 Nominal Money demand LIV]: 5Y50r Price leuel=1 Labor supp|v=50 Production function=2N n1} Calculate the effects of the monetary shock mentioned in i). Graph your results

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