Question
Use the IS-LM model to graphically analyze the following cases. Suppose two identical countries, Alpha and Beta, can be described by the IS - LM
Use the IS-LM model to graphically analyze the following cases. Suppose two identical countries, Alpha and Beta, can be described by the IS-LM model in the short run. The governments of both countries increase spending by the same amount. The Central Bank of Alpha follows a policy of holding a constant money supply. The Central Bank of Beta follows a policy of holding a constant interest rate. Use the IS- LM model to illustrate graphically and explain the policy impact of the expenditure increase on income and interest rates in the two countries.
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