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# Suppose Congress passes legislation that raises taxes. At the same time the Fed undertakes contractionary monetary policy.

7. Suppose Congress passes legislation that raises taxes. At the same time the Fed undertakes contractionary monetary policy. Use the IS-LM model to illustrate graphically the impact on output and interest rates. Explain the graph in words, specifically stating what happens to interest rates and output. Also explain what happens to investment and consumption.

7. Suppose Congress passes legislation that raises taxes. At the same time the Fed undertakes contractionarymonetary policy. Use the IS-LM model to illustrate graphically the impact on output and...