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In the early 1980s the us government cut taxes and ran a

Monetary and fiscal policy often changes at the same time.

a. Suppose the government wants to increase investment but keep output constant. Use the IS-LM model to show what policy mix of monetary and fiscal policy will achieve this goal.

b. In the early 1980s, the US government cut taxes and ran a deficit while the Fed pursued a tight monetary policy. What affect should this policy mix have?

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Macroeconomics: In the early 1980s the us government cut taxes and ran a

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