Gross domestic product-interest rates and employment

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Reference no: EM13817220

Apply the IS/LM fr. amework to explain the following question. In the early 1980's to combat the recessionary forces, President Ron Reagan used expansionary fiscal policy by lowering (marginal) tax rates to combat the recession. Concurrently, Paul Volcker, Chairman of the Federal Reserve Board of Governors, reduced the rate of growth of the money supply (reduction in the money supply) to combat inflation. Explain the total effect of these policies on real gross domestic product, interest rates, employment and inflation.

Reference no: EM13817220

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