According to the Keynesian IS-LM model, what is the effect of each of the following on

output, the real interest rate, employment, and the price level? Distinguish between the short run and the

long run.

(a) A wave of investor pessimism about the future profitability of capital investments.

(b) An increase in consumer confidence, as consumers expects that their incomes will be higher in the

future.

(c) A severe water shortage causes sharp declines in agricultural output and increases in food prices.