Using IS – LM curves, show graphically what will happen to output (Y) and interest rates (r) if:.

## IS – LM curves

Using IS – LM curves, show graphically what will happen to output (Y) and interest rates (r) if:

- FED increases money supply and Congress cuts spending.
- Both government spending and the money supply increase.
- The FED cuts the money supply and taxes are increased.
- Verify that equilibrium output will be 800 (Y = 800) and the interest rate 5 percent (r = 5).
- Suppose government spending increases by 65 (from 200 to 265) financed by running a budget deficit. What will happen to output and the interest rate?
- Suppose the government raises taxes by 65. What happens to output and the interest rate? 11. Supposegovernmentspendingincreasesby65financedbyataxincreaseof65.Whathappenstooutput

and the interest rate?

- Suppose the money supply increases by 65 (from 130 to 195). What happens to output and the interest rate?
- Suppose government spending increases by 65 and this is financed by an equal increase in the money supply. What happens to output and the interest rate?

### Chapter 5

- Suppose investment is not very sensitive to interest rates. Would you rather use fiscal or monetary policy to stimulate an economy that is in a recession. Explain in pictures and words.
- Suppose that money demand is extremely sensitive to interest rates. Would you use fiscal or monetary policy to stimulate an increase in GDP? Explain in words and pictures.
- What is meant by quantitative easing? When would the FED use it? Explain what it is meant to do and how it would work.
- What does the LM curve look like in the liquidity trap? How effective is monetary policy? Fiscal policy?

**For a Customized Paper on the above or Related Topic, Place Your Order Now!**

*What We Guarantee: *

**100% Original Paper****On-Time Delivery Guarantee****Automatic Plagiarism Check****100% Money-Back****100% Privacy and Confidentiality****24/7 Support Service**

Using IS – LM curves, show graphically what will happen to output (Y) and interest rates (r) if: