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Show the real output and interest rates

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Question: Use the IS/LM diagram to show what would happen to real output and interest rates when the following policy changes are implemented. In this problem, assume that prices remain constant.

(A) The Fed hires a helicopter to fly around the country and drop an average of $100 for each person.

(B) The Treasury mails a $100 check to everyone in the country. Fed policy accommodates this decision.

(C) The Treasury mails a $100 check to everyone in the country. The Fed does not accommodate.

(D) Congress votes a $100 income tax reduction for everyone in the country (those who do not pay any income taxes receive a $100 credit).

Reference no: EM131737319

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