Suppose in an economy Central bank sells government securities in the open market and at the same time government increases VAT rate.

A. Identify the type of fiscal and monetary policies: are they expansionary or contractionary and what is the aim of these policies?

B. Draw the Keynesian and Monetarist interpretations of ISLM model.

C. In each graph show how both policies mentioned above influence IS curve, LM curve, equilibrium interest rate and equilibrium national income.