1. What policy mix of monetary and fiscal policy is needed to meet the following objectives:

Decrease a fiscal deficit while keeping Y constant. Why must the interest rate also change?

2. As an economist, explain the combined effect of restrictive fiscal policy and expansionary monetary policy by maintaining the full employment in the long run.

3. As a consultant, advise to the economy XYZ about the policy mix to achieve higher level of output in the long run by keeping interest rate constant.

4. Use the information given below to answer the questions that follow:

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