The introduction and widespread availability of credit cards meant that people were suddenly willing to hold less money. The effect of this exogenous shockon equilibrium output and interest rate is as follows

A. increases interest rate,increases output

B. increases interest rate,decreases output

C. decreases interest rate,increases output

D. decreases interest rate, decreasesoutput

The introduction and widespread availability of credit cards meant that people were suddenly willing to hold less money.Suppose the Fed wants to neutralize the shock.Which of the following policies should it undertake?

A. increase money supply

B. sell government bonds

C. keep money supply growing at a constant rate

D. increase taxes

Suppose that the economy is in equilibrium.The Fed and the fiscal authority wish to cooperate in order to raise investment but keep output constant.Using the IS-LM model what mix of monetary and fiscal policy can achieve this?

A, Government increases its purchases,Fed increases money supply

B. Government decreases its purchases,Fed increases money supply

C. Government increases its purchases,Fed decreases money supply

D. Government decreases its purchases,Fed decreases money suppl