• assumptions are not valid in the short run
• in the long run we are all dead

• Increase in govt spending. decrease in taxes
• As spending increases AD shifts to the right increasing income and the price level until the economy is back at NAIRU

• government does not do initial spending consumers do
• as taxes decrease spending increases

• decrease (r) by increase in $ supply increases investment spending
• supply curve would shift to right and (r) would fall
• increase in TS shifts AD to the right

• people are less willing to hold money b/c it earns no interest.
• hold wealth in bonds
• so interest rates decrease

• amount of money that firms will be willing to invest at different interest rates
• Negative Function because as the interest rate falls firms are willing to invest more

if demand for money is very steep then (r) will change alot

in recession the d$ approaches horizontal 

No matter whats happens tot he (r) ppl do not