Q#3 (5 marks)

Use the IS-LM model to determine the effects of each of the following Shocks (hitting the economy at the same time) on the general equilibrium values of the real wage, employment, output, real interest rate, consumption, investment, and price level. Note: Properly explain each channel involved in the restoration process.

a. The expected rate of inflation rises at the same time central bank decrease money supply. b. working-age population increase at the same time government increase spending's