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In 2001, the Fed pursued an expansionary monetary policy and reduced interest rates. At the same time, President George W. Bush pushed through legislation that lowered income taxes. The accompanying /S-LM diagram describes the situation prior to any such policy changes. Initially the economy is at equilibrium point A. 1.) Using the line drawing tool, draw a new LM curve to illustrate the effect of an expansionary monetary policy. Properly label your curve. 2.) Using the 3-point curve drawing tool, draw a new /S curve to illustrate the effect of the tax cuts. Properly label your curve. 3.) Using the point drawing tool, indicate the new equilibrium point. Label your point 'B'. Carefully follow the instructions above and only draw the required objects..

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In 2001, the Fed pursued an expansionary monetary policy and reduced interest rates. At the same time, President George W. Bush pushed through legislation that lowered income taxes. The accompanying /S-LM diagram describes the situation prior to any such policy changes. Initially the economy is at equilibrium point A. 1.) Using the line drawing tool, draw a new LM curve to illustrate the effect of an expansionary monetary policy. Properly label your curve. 2.) Using the 3-point curve drawing tool, draw a new /S curve to illustrate the effect of the tax cuts. Properly label your curve. 3.) Using the point drawing tool, indicate the new equilibrium point. Label your point 'B'. Carefully follow the instructions above and only draw the required objects.

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