IS-MP and short-run output fluctuations: In the short-rum model, consider a domestic increase in demand for foreign goods. In particular, suppose that domestic residents experience a large increase in...

IS-MP and short-run output fluctuations: In the short-rum model, consider a domestic increase in demand for foreign goods. In particular, suppose that domestic residents experience a large increase in their taste for foreign-made products leading to an increase their demand for breign products. Using the standard IS/MP framework (recall, the MP curve is a horizontal line delineating where R lies across the IS curve), explain the macroeconomic comequences of the shock. If you were in charge of the Fed, how would you respond to stabilize short-run output?