Fiscal policy and monetary policy often change at the same time. Suppose the government wants to increase investment but keep output unchanged. In the IS-LM model, what mix of monetary and fiscal policy will achieve this goal?

Fiscal policy and monetary policy often change at the same time. Suppose the government wants to increase investment but keep output unchanged. In the IS-LM model, what mix of monetary and fiscal policy will achieve this goal?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter15: The Debate Over Monetary And Fiscal Policy

Section: Chapter Questions

Problem 8DQ

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Question

Fiscal policy and monetary policy often
change at the same time. Suppose the
government wants to increase
investment but keep output unchanged.
In the IS-LM model, what mix of
monetary and fiscal policy will achieve
this goal?

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