Open Question LI [ 5 Points ] Assume an open economy operating within a flexible exchange rate regime in line with the following equations LM Relation = Y . L(I) IS Relation: Y = C(Y -T) + 1(Y,i, ID) + G + NX(Y, Y, E) UIP Relation: 1+ 1 = (1 +0'); where M/P is the real money stock and Y, Y*C. /, G. T, E and i, " denote domestic and foreign output, household consumption, investment, government consumption, taxes, the nominal exchange rate (defined as domestic currency in terms of foreign currency) and the domestic and foreign interest rates. Assume that the domestic and foreign price levels, the expected exchange rate and the foreign interest rate are constant. The variable / captures business confidence: an increase in business confidence induces firms to increase spending. (A) [2 Pts] Draw the IS, LM and IP curves and label the initial equilibrium by the letter "A". Label all axes and the curves (i.e. make sure that your figure displays the following: "IS", "LM", "IP" "(", "E" and "Y")! (B) [2 Pts] Identify the curve(s) that shift(s) in response to a decrease in business confidence (I