Answers to Problem Set 5 - More on the AS-AD Model 1 What...

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More on the AS-AD Model1. What happens to the interest rate when the AD curve shifts to the right because government spending (G) increases? Explain using the IS-LM model. What happens to investment (I) and why?
2. What happens to the interest rate when the AD curve shifts to the right because the money supply (M) increases? Explain using the IS-LM model. What happens to investment (I) and why?

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