1) Describe how the following changes will aect the LM curve:
a. An increase in the money supply.
b. An increase in output.
c. A one-time increase in the price level.
2) In the Keynesian-cross model, why the tax multiplier is
smaller than the government-purchases multiplier? In the
IS-LM model, is the multiplier eect larger or smaller than in
the simple Keynesian-cross model? Explain.
3) Describe how the following events change the aggregate
demand curve: a. a decrease in the money supply. b. an
increase in the price level. c. an increase in government taxes.