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Use the IS-LM model to answer this question and assume that the central bank controls the...


Use the IS-LM model to answer this question and assume that the central bank controls the
interest rate. Suppose there is a simultaneous decrease in taxes and decrease in interest rate.


a. Explain what effect this particular policy mix will have on output and the money supply.


b. Based on your analysis, do we know with certainty what effect this policy mix will have on
investment? Explain

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