Assuming that the economy was initially at full employment and that the government now wants to change the composition of aggregate demand by increasing private investment while reducing consumption expenditure, but without changing the level of aggregate demand, what kind of mixed policy should be pursued? And represent this policy proposal on an IS- LM graph. You must use hand-drawn graphs to explain your analysis.

Assuming that the economy was initially at full employment and that the government now wants to change the composition of aggregate demand by increasing private investment while reducing consumption expenditure, but without changing the level of aggregate demand, what kind of mixed policy should be pursued? And represent this policy proposal on an IS- LM graph. You must use hand-drawn graphs to explain your analysis.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 2SQP

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