PART B: IS-LM for an Open Economy Consider a small open economy, which is at the long-run equilibrium unless a question indicates otherwise. The small open economy is described by the following equations: Cd = 300 + (1750/ T) 3001 Id = 200 2001 NX = 600 0.2Y 506 Md/P = 0.5Y 5002' where Y is output, T is a lump sum tax, G is government spending, 2' is the nominal rate of interest, 6 is the real exchange rate, and P is the price level. ii. iii. iv. vi. . Explain why there is a negative relationship between net export, NX, and the real exchange rate, 8. Derive an algebraic expression for the IS and LM curves with the real rate of interest, 1*, on the left-hand side of the equation. Assume the nominal money supply, M, is 2400, the price level of the domestic economy, P, is 2, the price level of the rest of the world, P1\a) Find the level of output in the short run. b) Find by how much the central bank had to change its nominal money supply to keep the nominal exchange rate constant in the Short run. c) Find the real money supply in the long run. (1) Finally, nd net export (N X ) and compare to your answer from part