Problem: Russia's invasion of Ukraine is causing energy prices to soar in the euro area (at an annual rate of 39% according to the Economist, June 2022).
The euro area is an open economy. Consider the open-economy IS/LM model and assume the euro (€) is freely floating against the US dollar ($). What will be the effects of the euro area's fiscal policy you designed in (first) on euro area output and interest rates, the €/$ exchange rate, and on US output and interest rates? How would your exchange rate answer change if the Fed responds by tightening monetary policy in the US?