According to the IS-LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? Be sure your answer includes an appropriate graph (hand-drawn). Also, make sure to include a very short qualitative analysis of the policies, showing the chain effects of the variables discussed. Do not overwrite! a. The central bank decreases the money supply - Short-run and Long-run effects (transition from SR to LR) of this policy (Use AD-AS plus IS-LM model for this part) b. A housing market crash that reduces consumer wealth - Short-run and Long-run effects (transition from SR to LR) of this shock (Use AD-AS plus IS-LM model for this part) c. The government increases taxes - Short-run and Long-run effects (transition from SR to LR) of this policy (Use AD-AS plus IS-LM model for this part) d. After the invention of a new high-speed computer chip, many firms decide to upgrade their computer systems - Short-run and Long-run effects (transition from SR to LR) of this shock (Use AD-AS plus IS-LM model for this part)
According to the IS-LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? Be sure your answer includes an appropriate graph (hand-drawn). Also, make sure to include a very short qualitative analysis of the policies, showing the chain effects of the variables discussed. Do not overwrite!
a. The central bank decreases the money supply - Short-run and Long-run effects (transition from SR to LR) of this policy (Use AD-AS plus IS-LM model for this part)
b. A housing market crash that reduces consumer wealth - Short-run and Long-run effects (transition from SR to LR) of this shock (Use AD-AS plus IS-LM model for this part)
c. The government increases taxes - Short-run and Long-run effects (transition from SR to LR) of this policy (Use AD-AS plus IS-LM model for this part)
d. After the invention of a new high-speed computer chip, many firms decide to upgrade their computer systems - Short-run and Long-run effects (transition from SR to LR) of this shock (Use AD-AS plus IS-LM model for this part)
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