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Use the IS- LM Model to Answer This Question and Assume

question 21

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Use the IS- LM model to answer this question and assume the central bank controls the money supply. Suppose there is a simultaneous decrease in government spending and increase in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.


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