We present a theory of magnetic (Ni) and nonmagnetic (Zn) impurities substi
tuted into planar Cu sites in the normal state of underdoped cuprates exhib
iting a spin gap. Both types of impurities induce magnetic moments on neigh
boring Cu sites, which in the case of Ni partially screen the inherent impu
rity spin, resulting in an effective S = 1/2 moment. We investigate the imp
urity-induced polarizability, taking into account the presence of short-ran
ge AF correlations, and calculate the O-17 NMR line broadening induced by i
mpurity doping. (C) 1999 Elsevier Science B.V. All rights reserved.