Shock: investors expect a depreciation of the home currency…

Shock: investors expect a depreciation of the home currency in the future. Assume the government allows the exchange rate to float and responds to the shock using monetary policy to stabilize output. Use the IS-LM-FX model to state the effect of the given shock above on the output, interest rate, exchange rate, consumption, investment and trade balance (increase, decrease, no change, or ambiguous). To get full credits, you must show all steps.