8- (10 pts) According to the IS-LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? Be sure to illustrate your answer by using an appropriate graph. a) The central bank increases the money supply. b) The government increases government purchases. c) The government increases taxes. d) The government increases government expenditure and taxes by equal amounts.

8- (10 pts) According to the IS-LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? Be sure to illustrate your answer by using an appropriate graph. a) The central bank increases the money supply. b) The government increases government purchases. c) The government increases taxes. d) The government increases government expenditure and taxes by equal amounts.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 42CTQ: On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because...

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