Economics Homework Solutions
Problem
#40638

Basic Macroeconomics question (2)

This is a question from a past exam paper in Macroeconomics. Unfortunately I haven't been able to get an answer sheet for this paper so I am looking for a "model answer" (if such a thing exists!) to the question for revision.

In the context of a closed economy IS-LM model;

(a) Under what circumstances would the following have no effect of the level of output?
i. An increase in government spending.
ii. An open market purchase of bonds, from the public.

(b) Under what circumstances would the following have no effect on the rate of interest?
i. An increase in government spending.
ii. An open market purchase of bonds, from the public.

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