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A major component of the recovery plan is the use of fiscal policy and monetary policy to help stabilize the economy. With the use of

A major component of the recovery plan is the use of fiscal policy and monetary policy to help stabilize the economy. With the use of appropriate IS-LM diagrams, illustrate the following

a. The economic impact of expansionary fiscal policy if the central bank seeks to maintain the interest rate.

b. From part a. above, determine with the use of appropriate calculations which fiscal tool(s) would be most effective in increasing real GDP if the economy's level of investment is 2,500 and its marginal propensity to consume is 0.87.

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