2. An excellent way to learn about how changes in various factors affect the IS and LM curves is to visit www.worldbank.org.ru/wbimo/islmcl/islmcl.html. This site, sponsored by the World Bank, allows you to make changes and to observe immediately their impact on the ISLM model.

a. Increase G from 1,200 to 1,400. What happens to the interest rate?

b. Reduce T0 to .08. What happens to aggregate output Y ?

c. Increase the M to 1,100. What happens to the interest rate and aggregate output?