Use the IS-LM model and create an enlarged version of Figure 1 to answer the following question. Suppose in period 0 that the United States is initially at full employment. The central bank operates a fixed exchange rate regime pegged to E. Then, in period 1 there is a temporary increase in government spending that lasts for one period. (a) (5 pts.) Label the initial curves as (ISo, LM, UIPo). Indicate the initial equi- librium outcomes for output, the interest rate, the exchange rate and label the points (Yo, Ro. Eo). (b) (5 pts.) Short-run: Using the same graph from part (a), label the new curves in the short run (IS, LM, UIP), reflecting any shift, and indicate the short-run equilibrium outcome (Y, R, E). Figure 1: Template for IS-LM diagram UIP B La