Question: Draw a graph showing the ISLM model and identify the initial equilibrium. a. For each of the following changes, show the effect on the output

Draw a graph showing the IS–LM model and identify the initial equilibrium.
a. For each of the following changes, show the effect on the output gap and the real interest rate.
i. The government increases taxes.
ii. The Fed decreases the money supply.
iii. Consumers experience an increase in wealth due to increases in stock prices.
b. How would your answers above be different if you were using the IS–MP model?

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