Explain the IS-LM model.Using the model explain the effect of an increase in government purchases.

Starting from the initial equilibrium, suppose the Fed unexpectedly decreases the money supply by 10%. Describe what happens to the following variables both in the short-run and in the long-run : (i) output (Y) (ii) employment (N) (iii) expected real interest rate (r) (iv) price level (P) (v) real wages (W/P)