5. Monetary policy and fi scal policy often change
at the same time.
a. Suppose that the government wants to raise
investment but keep output constant. In the
IS–LM model, what mix of monetary and
fiscal policy will achieve this goal?
b. In the early 1980s, the U.S. government cut
taxes and ran a budget deficit while the Fed
pursued a tight monetary policy. What effect
should this policy mix have?
.