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Question Two (16 marks) Fiscal policy and monetary policy often change at the same time 1. Suppose the government wants to increase investment but keep

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Question Two (16 marks) Fiscal policy and monetary policy often change at the same time 1. Suppose the government wants to increase investment but keep output unchanged. In the IS-LM model, what mix of monetary and fiscal policy will achieve this goal? 2. In early 1980s, the Canadian government ran a budget deficit while the Bank of Canada pursued a tight monetary policy. What effect should this policy mix have

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