Government spending and reduction in the money supply

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Use the IS-LM model to answer this question.

Suppose there is a simultaneous increase in government spending and reduction in the money supply. Explain with the help of a graph 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.

Reference no: EM131245295

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