Aggregate Demand II - End of Chapter Problem @ Macmillan Learning Consider what happens, according to the /S-LM model, in the short run to the interest rate, income, consumption, and investment in each of the following circumstances. For each scenario, (1) shift the appropriate curve to the new equilibrium in the IS-LM graph, and (2) indicate the resulting change to each variable by dragging the icon for each variable into the appropriate category of either "increase" or "decrease." a. The central bank increases the money supply. 10 ID Interest Rate (in *) 0 2 4 B 10 12 14 16 18 20 Income (in billions of $)Increase Decrease Answer Bank income investment consumption interest rate b. The government increases government purchases. 10 IM Rate (in *)IM B @ Macmillan Learning Interest Rate (in $) IS 2 4 6 B 10 12 14 1 16 18 20 Income (in billions of $) Increase Decrease Answer Bank investment income interest rate consumptionc. The government increases taxes. Macmillan Learning 10 ID LM Interest Rate (in $) IS 0 2 4 10 12 14 1 18 20 Income (in billions of $) Increase DecreaseAnswer Bank consumplan Investment interest rate income @ Macmillan Learning d. The government increases government purchases and taxes by equal amounts. 10 IM Interest Rate (in *) 2 4 6 10 12 14 16 18 20 Income (in billions of $) Increase DecreaseInterest Rate @ Macmillan Learning IS 4 B 10 12 14 16 18 20 Income (in billions of $) Increase Decrease Answer Bank consumption investment interest rate income