Response 2: hold r constant If Congress raises G the s curve shifts LMi right Lm2 To keep r constant Fed increases to shift LM curve right. Results △y=y3-Y YY2Y3 △r=0 CHAPTER 11 Aggregate Demand Il slide 9CHAPTER 11 Aggregate Demand II slide 9 If Congress raises G, the IS curve shifts right IS1 Response 2: hold r constant Y r LM1 r1 Y1 IS2 Y2 To keep r constant, r2 Fed increases M to shift LM curve right.  = − Y Y Y 3 1  = r 0 LM2 Y3 Results: