Question 1. Suppose that the worth diploma associated for money demand consists of the worth of imported objects and that the worth of imported objects relies upon upon the alternate price. That is, the money market is described by M/P= L(r,Y) the place P=λP D +(1−λ)P F / e The parameter λ is the share of residence objects inside the worth index P. Assume that the worth of residence objects P D and the worth of abroad objects measured in abroad foreign exchange P F are mounted. Suppose we graph the LM * curve for given values of P D and P F (in its place of the usual P). Is that this LM * curve nonetheless vertical? Make clear. What is the impression of expansionary fiscal protection under floating alternate expenses on this model? Make clear. Distinction with the standard Mundell–Fleming model. Suppose that political instability will improve the nation menace premium and, thereby, the speed of curiosity. What is the impression on the alternate price, the worth diploma, and mixture income on this model? Distinction with the standard Mundell–Fleming model. Question 2. Please embrace graphs Suppose the federal authorities in a small creating financial system positioned restrictions on agricultural exports in an effort to boost the house meals present and reduce meals prices. Use the Mundell-Flemming model to analysis the short-run outcomes of this protection on the alternate price, and precise GDP if the nation has a: versatile alternate price mounted alternate price. Question three. A CURRENCY CRISIS Please embrace graphs Ponder an financial system with mounted alternate expenses. Suppose that authorities devalues unexpectedly and that merchants think about that there’ll in all probability be no extra devaluation. What can be the outcomes of the devaluation on output and on the speed of curiosity? Suppose in its place that after the devaluation merchants think about that one different devaluation is extra more likely to come shortly. What can be the outcomes of the preliminary devaluation on output and on the speed of curiosity?