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(a) Due to a technological boom and
rapid expansion of the economy, the Federal Reserve Bank is
pursuing a contractionary monetary policy. Using a graphical
analysis, show the effects of this policy on the equilibrium
interest rate, investment and output. Make sure you clearly label
all the curves in your graphs and the initial and final
equilibria.

(b) Due to a technological boom and
rapid expansion of the economy, the Federal Government is pursuing
a contractionary fiscal policy. Using a graphical analysis, show
the effects of this policy on the equilibrium interest rate,
investment and output. Make sure you clearly label all the curves
in your graphs and the initial and final equilibria. Is there any
crowding-out due to the contractionary fiscal policy?

Note: To answer both parts of this
question you need to draw three graphs, one for each market:
aggregate output, money market and investment market.