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In a Normal IS-LM Framework, If Government Purchases and Taxes

Question 45

Multiple Choice

In a normal IS-LM framework, if government purchases and taxes are both increased by the same amount, the level of output


A) will increase by exactly that amount
B) will remain the same but its composition will change
C) will not change and neither will the composition of output
D) will increase as will the interest rate
E) will increase but only if this fiscal policy is accommodated by expansionary monetary policy

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