Assume the government of Happyland decided to increase government spending (G). Use the IS-LM model to illustrate and analyze graphically the effect of this expansionary fiscal policy on the income (Y), interest rate (r), and Investment (I) under the following two cases:

A)(3 points) If the demand for money is extremely sensitive to the interest rate.

B)(3 points) If the investment is not sensitive to the interest rate.

Instructions:

-After you graphs, please complete the mentioned table based on your analysis.

-To get the full mark, your answers in the table should match your wn graph.

Be sure to label: (i). the axes (ii). the curves, (iii). the initial equilibrium values, (iv). The direction curves shift (if there), (v). the terminal equilibrium values (if there).