Discussion:
1. Describe the policy mix that would result in each of the following situations.
a. The interest rate decreases, investment increases, and the change in aggregate output is indeterminate.
b. Aggregate output increases, and the interest rate change is indeterminate.
c. The interest rate increases, investment decreases, and the change in aggregate output is indeterminate.
d. Aggregate output decreases, and the interest rate change is indeterminate.
2. Expansionary policies are designed to stimulate the economy by increasing aggregate output. Explain why expansionary fiscal policy and expansionary monetary policy have opposite effects on the interest rate despite having the same goal of increasing aggregate output. Illustrate your answer with graphs of the money market.