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Macroeconomics

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IS-LM Optimal Response to Consumer Confidence Shock

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If goods prices are perfectly sticky, then the response to a negative shock to consumer confidence that restores the original interest rate and level of GDP is

A

an increase in the money supply.

B

an increase in the budget deficit.

C

a decrease in the money supply.

D

a decrease in the budget deficit.

E

an increase in the budget deficit and the money supply.