What combinations of ?nancing allow no change in investment

Reference no: EM13897759

Suppose that the government wants to increase its expenditure g and has the options of ?nancing it by higher taxes, bond issues or increases in the monetary base. Further, when g is increased through bond or monetary ?nancing, the central bank can also undertake offsetting open market operations.

What combinations, if any, of ?nancing methods and open market operations will allow the following goals to be met in the IS-LM model:

(i) no change in aggregate demand;

(ii) no change in investment;

(iii) no change in aggregate demand and investment?

Reference no: EM13897759

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