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Use IS-LM model to show the short-run effects of each of the following shocks onaggregate demand - AD. Ineach case, explain what happens to aggregate
Use IS-LM model to show the short-run effects of each of the following shocks onaggregate demand - AD. Ineach case, explain what happens to aggregate demand and the price level in the economy.
Please make sure you plot the graphs and directions of shifts are clear and visible.
a) The government increases taxes.
b) The government increases government purchases and taxes by equal amounts.
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