• Explain in words how investment multiplierand the interest sensitivity of aggregate demand affect the slope of theIScurve.
• Explain in words how and why the income and interest sensitivities of the demand for real balances affect the slope of theLMcurve.
• According to theIS-LMmodel, what happens to the interest rate, income, consumption, and investment under the following circumstances? a. The central bank increases the money supply. b. The government increases government purchases. c. The government increases taxes.