I need help with the following graphs as well as what the change is for each variable.
For each of the following scenarios, assume the economy experiences an exogenous decrease in investment demand. For each case, illustrate the IS-LM-FX diagram and state and explain briefly the effect of the shock (increase, decrease, no change, or ambiguous) on the following variables:Y, i, E, C, I, TB.
Here, we assume the policy makers' objective is to keep output fixed at its initial value.
a. Monetary policy response under a floating exchange rate regime.
b. Fiscal policy response under a floating exchange rate regime.
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