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Suppose that IS curve is relatively steep, and LM curve is relatively flat. From the slope of IS curve, what can you tell about the relation between interest rate and investment? Also from the slope of LM curve, is an increase in money supply effective to lower interest rate? Now suppose that policy makers like to increase national income. Which of expansionary fiscal policy and expansionary monetary policy is more effective to achieve the policy goal? Explain with the IS-LM model.

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9490287

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