Aggregate Demand II - End of Chapter Problem @ Macmillan Learning Monetary policy and fiscal policy often change at the same time. For both scenarios below, 1) adjust the IS-LM graph to reflect the policy mix scenario, and 2) answer the related question. a. Suppose the government wants to raise investment but keep output (1) constant. Adjust the IS-LM graph below to reflect the necessary fiscal and monetary policy mix necessary to achieve this goal. Increase Investment, Maintain Output 10 9 Interest Rate r (in *) 2 2 4 B 10 14 16 18 20 Income, Y (in trillions $)The Fed should . | the money supply, and the povernment should incresse b. In the early 1980s, the U.5. government cut taxes and ran a budget deficit, while the Fed pursued a tight monetary policy. & Macmillan Learning Tax Cut and Tight Monetary Policy