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Question 2: Keynesian Cross and IS/MP Using the planned expenditures/Keynesian cross diagram AND the IS/MP diagram for each letter below, illustrate how each of the
Question 2: Keynesian Cross and IS/MP Using the planned expenditures/Keynesian cross diagram AND the IS/MP diagram for each letter below, illustrate how each of the following affects the economy's short-run equilibrium. Your two diagrams must be aligned vertically and must be consistent to receive credit. Your diagrams MUST clearly illustrate any intermediate/endogenous shifts that occur when applicable (label these Point B' on your graphs). Please label your diagrams consistent with the way we worked through these problems in class. State which exogenous variable in the model is changing. State how the following variables are affected in this model (increase, decrease, no change): output, income, consumption, the real interest rate and investment. a) Increase in government spending. b) Increase in household taxes. 0) Increase in government spending and increase in household taxes by the same amount. (1) Increase in consumer condence. 6) Federal Reserve decreases the interest rate. f) Decrease in business condence
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