Question

MacroEconomics - Can someone answer these questions please?

17. Use the IS-LM model to answer the following questions. In this framework, investment depends on the interest rate and output. a. Suppose that the US federal government tries to cut its fiscal deficit. In an IS-LM diagram, show the effect of the cut in fiscal deficit on output and the interest rate. b. How will the reduction of fiscal deficit affect consumption, investment and private saving? Explain clearly.

Answer 1

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