as interest rates, and investment. In Figure 12-10 the economy can move to full employment by an expansion in either mon or the full-employment deficit. Which policy leads to E, and which to E,? How would expect the choice to be made? Who would most strongly favor moving to E, ? versus What policy would correspond to "balanced growth"? EmpiricalCHAPTER 12.MONETARY AND FISCAL P LM Interest rate o Ez IS Yo Y* Income, output FIGURE 12-10 EXPANSIONARY POLICIES AND THE COMPOSITION OF OUTPUT. a boom. Over time, given enough cycles, the government sector becomes a conservative would want it to be. The counterpart view belongs to thos that there is a broad scope for government spending on education, the en training and rehabilitation, and the like, and who, accordingly, favor policies in the form of increased government spending and higher taxes