Chapter 12: Aggregate Demand II: Applying the IS-LM ModelQuestion: If taxes increase, but the central bank raises the money supply to stop income fromdeclining, then:9 both consumption and investment increase.O b. investment rises but consumption falls.OE both consumption and investment fall.d.consumption rises but investment falls.O E both consumption and investment remain unchanged. Chapter 13: The Open Economy Revisited: The Mundell-Fleming Model and the exchange rate regimeQuestion: In a small open economy with a floating exchange rate, if the government decreas es themoney supply, then in the new short-run equilibrium:O a. Both exchange rate and income increase.b.income remains unchanged but the exchange rate rises.O C.income falls and the exchange rate rises.the exchange rate falls and income rises.e the exchange rate remains unchanged but income falls.

Since, you have posted multiple questions, we will solve the fistrst for you. In case xes affect…

Chapter 12: Aggregate Demand II: Applying the IS-LM Model Question: If taxes increase, but the central bank raises the money supply to stop income from declining, then: O a. both consumption and investment increase. O B. investment rises but consumption falls. O both consumption and investment fall. . consumption rises but investment falls. O E both consumption and investment remain unchanged.