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    Exam 7: Keynesian System III: Policy Effects in the Is-Lm Model
  5. Question
    Suppose That Both Government Spending and Taxes Decrease by $1,000
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Suppose That Both Government Spending and Taxes Decrease by $1,000

Question 1

Question 1

Essay

Suppose that both government spending and taxes decrease by $1,000.What happens to aggregate income and interest rates? By how much will they change? Explain using an IS-LM graph to illustrate.

Correct Answer:

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