Question 2.This question uses a numerical example to understand the connections between the goods, money, and foreign exchange (FX) markets. Use the information in the table below to answer the questions that follow.(4.5 points)

Goods Market	Money Market	FX Market
C= 300 + 0.8(YT) T= 400	M= 1050	E^e=2
I= 400 2,000i(e= 0)	L= 0.5Y 5,000i	i*= 8%
G= 500
TB= 400(1 2/E) 0.2(Y 100)

a.Find the MPC,MPC_F,MPC_H, andMPSfor this economy.(0.5 point)

b.Using the uncovered interest parity condition, solve for the exchange rate (E) as a function of the home interest rate (i).(0.5 point)

c.Write out an expression for the IS and LM curves. You should have output (Y) expressed as a function of the interest rate (i).(0.5 point)

d.Find the equilibrium (home) interest rate,i, and the equilibrium (home) output,Y. Calculate consumption, investment, trade balance, and exchange rate at the economy's equilibrium.(0.5point)