Exhibit: Policy Interaction Based on the graph, starting from equilibrium at interest rate r₃, income Y₂, IS₁, and LM₁, if there is an increase in government spending that shifts the IS curve to IS₂, then in order to keep output constant, the Bank of Canada should _____ the money supply, shifting to _____. A)increase; LM₂ B)decrease; LM₂ C)increase; LM₃ D)decrease; LM₃

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The Answer of Exhibit: Policy Interaction Based on the graph, starting from equilibrium at interest rate r₃, income Y₂, IS₁, and LM₁, if there is an increase in government spending that shifts the IS curve to IS₂, then in order to keep output constant, the Bank of Canada should _____ the money supply, shifting to _____. A)increase; LM₂ B)decrease; LM₂ C)increase; LM₃ D)decrease; LM₃

Exhibit: Policy Interaction Based on the Graph, Starting from Equilibrium