C = 100+0.8(1-t)Y I = 200- 1000i  L = 1/2Y-7000i G= 700  t = 0.33 M/P = 500 a) using the  IS - LM model show the impact of the tax cut under two assumptions : i) the government keeps interest rates constant Through an accommodating Monetary Policy.  ii) The money stock remains unchanged  B) Explain the difference in result

C = 100 + 0.5 · (Y – T) I = 500 – 1000 - r where Y is real output and r is the real interest rate. Government purchases and taxes are Ğ = 500, T = 100. The LM (money market equilibrium) curve is MY P 5i where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 8000 units of money, and expected inflation is a = 0. Assume that the long-run equilibrium level of output is Y = 2000. Short-run equilibrium output is initially at the same level (Y = 2000). Suddenly, news of a new world-beating super-vaccine raises expected inflation to = 0.05. 1. Suppose the government (not the CB) wants to stabilise the shock in the short-run. Explain whether it should increase the government deficit (AĞ > AT) or reduce it (AĞ < AT), and how it works. 2. Now suppose the government doesn't do anything, and the CB wants to stabilise the shock in the short-run. Explain whether it should decrease or increase money supply M if it wants to bring output Y back to…

Use the IS/MP framework to explain the impact of stabilization policy to correct for a negative output in the short-run.

Suppose three economies are hit with the same negative supply shock.   In country A, inflation initially rises and output falls; then inflation rises more and output increases.   In country B, inflation initially rises and output falls; then both inflation and output fall.   In country C, inflation initially rises and output falls; then inflation falls and output eventually increases. What type of stabilization approach did each country take?   The answer choices for each country are: Stabilize inflation, stabilize output, or do nothing