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Question 8 1 pts Consider the IS-LM model. Start from an equilibrium, and assume the interest rate is far from the zero lower

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Answer #1

First option is correct

Fiscal expansion will result in increasing the rate of interest. This happens when the IS curve shifts to the right as a result of fiscal expansion. However the central bank will intervene in order to reduce the interest rate and maintain the target level. this intervention will take the form of increasing the money supply which means a monetary expansion.

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