QUESTION 1 Exhibit: Policy Interaction Interest rate. r Yi Y: Y: Y; Income. Output, Y Based on the graph, starting from equilibrium at interest rate r3, income Y2, 181, and LM1, if there is an increase in government spending that shifts the IS curve to 1'82 and the Federal Reserve does not change the money supply, the new equilibrium combination of interest and income will be: 0 312: Y3. O b.r1, Y2 C) Cr r3, Y3_ 0 C113, Y4_ QUESTION 9 Which of the following best defines the LM curve? O Illustrates the effects of changes in M on investment. O The combinations of i and Y that maintain equilibrium in the financial markets. O Illustrates the effects of changes in Y on money supply. O Illustrates the effects of changes in i on desired money holdings by individuals. O The combinations of i and Y that maintain equilibrium in the goods market. QUESTION 10 Suppose there is a simultaneous tax increase and open market purchase of bonds. Which of the following must occur as a result of this? O Output increases. O Output decreases. O The interest rate increases. O The interest rate decreases. O Both output and the interest rate increase