Suppose the US government wants to stimulate GDP by $3 billion in the short run, and...

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Suppose the US government wants to stimulate GDP by $3 billion in the short run, and is trying to decide between using either monetary policy or fiscal policy (in particular, a tax cut). i. Draw a separate IS-LM diagram for each of these policies in the short run; label the policy above each graph. Be sure to label the axes, the curves, and use arrows showing the direction the curves shift. Explain each curve shift briefly. Discuss the differences in the effects of the two polices on i). the real interest rate and ii). total national saving. If the US government's goal were to raise GDP by the $3 billion amount, while keeping national saving as high as possible (since its already very low in the US), which policy would be the better choice? Explain your reasoning. Suppose the US government wants to stimulate GDP by $3 billion in the short run, and is trying to decide between using either monetary policy or fiscal policy (in particular, a tax cut). i. Draw a separate IS-LM diagram for each of these policies in the short run; label the policy above each graph. Be sure to label the axes, the curves, and use arrows showing the direction the curves shift. Explain each curve shift briefly. Discuss the differences in the effects of the two polices on i). the real interest rate and ii). total national saving. If the US government's goal were to raise GDP by the $3 billion amount, while keeping national saving as high as possible (since its already very low in the US), which policy would be the better choice? Explain your reasoning.

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